India-dedicated funds saw inflows of $2.3 billion in March, taking the total category inflows in FY24 to $23.8 billion, the latest EPFR data compiled by Kotak Institutional Equities showed.
These funds saw inflows of $16.2 billion in CY23. They also saw outflows of $2.2 billion, $3.8 billion and $8.8 billion in the previous three calendar years.
March’s flows for the category comprise $1.5 billion of ETF inflows and $738 million of non-ETF inflows. Most India-dedicated offshore funds are actively managed and have expense ratios substantially higher than those of ETFs. Their continuing popularity, despite higher expenses, indicate that many foreign investors prefer active management over passive when it comes to investing in India, said experts.
Other non-dedicated funds, including global emerging market funds, pulled out $375 million in March, dragging the total EPFR India flows down to $1.9 billion. GEM and other funds saw total outflows of nearly $5.7 billion during FY24.
Among peers, Taiwan and China witnessed $6.9 billion and $113 million of inflows in March whereas Brazil, Indonesia and Thailand saw outflows of $547 million, $257 million and $171 million. Total FPI and EPFR activity showed divergent trends for Indonesia and Taiwan and similar trends for India and Thailand.
The EPFR fund flow data primarily tracks mutual funds, ETFs, closed-end funds, variable annuity funds and insurance-linked funds. It does not include investments from hedge funds, proprietary desks, and sovereign wealth funds, which are tracked by NSDL.
- Also read: At $41.6 b in FY24, net FPI inflows into Indian markets the highest since FY16: RBI report
Meanwhile, foreign portfolio investors (FPIs) have invested ₹1,156 crore in equity and have sold ₹1,726 crore in debt this month. The latest jobs data in the US indicates a slowing economy, which may necessitate rate cuts. The wage increase falling below 4 per cent also reflects a weakening labour market.
“From the stock market’s perspective this is good news. That’s why the US markets rallied sharply on Friday. More than anything else, FPIs will respond to changes in the US bond yields. If the US bond yields fall and the Indian economy and markets do well, they will turn into aggressive buyers,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.