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The India-focused offshore fund and ETF category received a net inflow of $6.54 billion in the December quarter, marking the sixth consecutive quarter of net inflows and the second-highest quarterly inflow to date. The September quarter had seen the highest-ever quarterly net inflow of $7.97 billion.
Robust net inflows and a strong rally in the Indian equity market drove the asset base of the category to $72.2 billion, up 20.6 per cent from $59.8 billion in the previous quarter, according to Morningstar India’s Offshore Fund Spy report.
iShares MSCI India ETF received the highest net inflows of around $1.23 billion among the large funds, followed by iShares MSCI India ETF USD Acc and WisdomTree India Earnings ETF with $681 million and $512 million, respectively.
India-focused offshore funds saw net inflows of $3.54 billion during the December quarter, as against $5.70 billion during the previous quarter, making it the second-highest for the segment to date.
India-focused offshore ETFs received net inflows of $3 billion, as against $2.28 billion in the previous quarter.
The Sensex registered a gain of 9.74 per cent, while the BSE Midcap Index and BSE Small Cap Index surged by 13.91 per cent and 13.61 per cent, respectively, in the December quarter.
Risk-return advantage
“The US Fed signalled three potential rate cuts in 2024, indicating the end of the rate-hike cycle. The decline in US Treasury bond yields led foreign investors to reassess their investment in the Indian equity markets, considering its improving risk/return profile and potential for growth,” Morningstar said in a note.
The India-focused offshore fund and ETF category registered a gain of 10.75 per cent during the quarter, whereas the MSCI India USD Index delivered a return of 11.98 per cent. Of the 285 funds under consideration, 112 managed to outperform both the category average and the MSCI India USD Index during the quarter ended December.
The largest fund among India-focused offshore funds and ETFs, iShares MSCI India ETF, delivered a return of 10 per cent during the quarter but underperformed the category average (10.7 per cent) and MSCI India GR USD Index (12 per cent). Over one-year and three-year periods, the fund underperformed both category peers and the index, according to Morningstar.
Nomura India Equity was the top-performing fund during the quarter among the 10 largest India-focused offshore funds and ETFs. It clocked a return of 11.6 per cent, outperforming the category average. Its outperformed the category average and index over a one-year period but underperformed both over three years.
The assets of other regionally diversified equity funds and ETFs surged during the quarter ended December 2023 by 5.07 per cent to $8.8 trillion from $8.3 trillion in the previous quarter. 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.
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