For the July-September quarter, India-focused offshore funds and exchange traded funds, or ETFs, registered a net inflow of $1.18 billion. The September 2014 quarter edition of Morningstar India - Offshore Fund Spy gives an insight into the performance and flows of funds investing into India.
Asset flows of India-focused offshore funds and ETFs
- India-focused offshore funds and ETFs registered a net inflow of $1.18 billion for the third quarter. Of this, India-focused mutual funds registered inflows of $678 million, while India-focused ETFs registered $505 million of inflows. India-focused offshore mutual funds have registered inflows after nine quarters of continuous outflows which indicates the growing interest by foreign investors in the India story.
- Monthly flows indicate the strongest inflows into India-dedicated offshore funds and ETFs came in the month of September at $490 million, following inflows of $171 million and $45 million in July and August respectively.
- Assets of all India-focused offshore funds and ETFs increased by 6.6% during the second quarter to about $38.3 billion at the end of September 2014. The total assets of these funds and ETFs are still down by 31% from the peak of $55.7 billion in 2010.
How the funds performed
- India-focused offshore equity mutual funds and ETFs delivered an average return of 3.76% (in USD terms) during the quarter, outperforming the MSCI India Index by 1.4%.
- Investors preferred booking profits in sectors linked to the growth of the Indian economy. Thus sectoral indices such as realty, power, metals, capital goods, oil and gas and banking underperformed the broad market. On the other hand, defensive sectors such as healthcare, fast-moving consumer goods and IT helped the performance of the index.
Allocation to India
- Asia ex-Japan funds, emerging market funds, ETFs and other global funds with partial allocations to India have all increased their weightings to India.
- Asia ex-Japan funds experienced inflows of $11 billion during the third quarter. These funds contributed $490 million of inflows into Indian equity markets.
- While emerging market funds also increased their allocation to India to 8.9% from 8.4%, assets of these funds declined, resulting in outflows of $90 million during the quarter.
- Global funds with partial allocations to India as a category increased their allocation to India to 2.81% from 2.68%, which resulted in inflows of $2.91 billion into Indian stocks during the quarter.
Morningstar India - Offshore Fund Spy - September 2014
