The India-focused offshore funds and ETF category continued to witness net outflows during the quarter ended June 2022, which was the 17th consecutive quarter of net outflows, a funds flow report from Morningstar said. 

The report said the quantum of net outflows rose to $1.58 billion during the quarter from $1.28 billion in the previous quarter ended March 2022.

The India-focused offshore funds segment witnessed a net outflow of $587 million during the June 2022 quarter, which was lower than the net outflow of $800 million during the March 2022 quarter.

The quantum of net outflows was much higher in the case of the India-focused offshore ETFs segment, with net outflows of $1.0 billion, which was strikingly higher than the net outflow of $475 million recorded in the previous quarter, the report said.

Given the net outflows and correction in the markets, the asset base of the India-focused offshore fund and ETF category declined 18.5 percent to $38.1 billion from $46.7 billion in the previous quarter. Fifty-six funds, out of the total 256, received net inflows amounting to $229 million. The remaining funds witnessed net outflows amounting to $1.83 billion.

Intense volatility

The markets continued to witness intense volatility during the quarter ended June 2022, keeping investors on the edge. Through the quarter, the large-cap segment outperformed its mid- and small-cap counterparts. While S&P BSE Sensex fell 9.48 per cent during the quarter, the S&P BSE Midcap and S&P BSE Smallcap indices declined 9.93 per cent and 12.15 per cent, respectively.

The India-focused offshore funds and ETF category fell 13.80 per cent during the quarter, thus underperforming the MSCI India USD Index, which fell 13.52 per cent. None of the India-focused offshore funds and ETFs managed to deliver a positive performance during the June 2022 quarter. Out of the universe of 256 funds under consideration, 94 managed to outperform both the category average and the MSCI India USD Index.

Funds with partial allocation

The assets of other regionally diversified equity funds and ETFs dropped during the quarter ended June 2022 by 16 per cent from $9.10 trillion in the previous quarter to $7.67 trillion. Other regionally diversified equity funds and ETFs include Asia/Asia-Pacific funds, emerging-markets funds, and global funds. These are foreign funds that have a partial allocation to Indian equities. The value of investment into Indian equities in regionally diversified funds also fell to an estimated $244 billion during the June 2022 quarter, compared with $289 billion recorded in the previous quarter, a fall of 15.5 per cent.

The value of investment into Indian equities declined in the portfolios of emerging markets, Asia/Asia-Pacific, as well as global funds during the quarter ended June 2022. Interestingly, the allocation percentage to Indian equities rose in the case of global funds. But it declined in case of emerging markets and Asia/Asia-Pacific funds.

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