A total of $803 million in net inflows was recorded to the Indian market from India-focused offshore funds and exchange-traded funds (ETFs) for the quarter ended March 2023, according to a Morningstar Offshore Fund Spy report.
An offshore India fund is one that is not domiciled in India, but invests primarily in Indian equity markets.
Assets And Inflows
Morningstar analysed assets and flows of India-Focused Offshore Fund and ETFs, covering 285 primary funds and ETFs. After 17 consecutive quarters of net outflows, India-focused offshore funds and ETFs experienced a positive trend, with three consecutive quarters of net inflows, the report said.
The March 2023 quarter witnessed a net inflow of $803 million, slightly lower than the previous quarter’s inflow of $884 million.
India-focused offshore funds received net inflows of $314 million, while offshore ETFs received net inflows of $489 million.
Despite net inflows, the overall asset base of the category decreased by 1 per cent due to the decline in the Indian equities markets. Out of 256 funds, 104 experienced net outflows amounting to $774 million, while the remaining funds received net inflows of $1.58 billion.
Foreign institutional investors (FIIs) became net sellers during the quarter ended March 2023, after injecting $5.78 billion into the Indian equities markets in the quarter ending December 2022.
“They withdrew from emerging economies like India owing to the valuation worries, difficulties encountered by Adani Group firms and their effects on the larger market, and hawkish stances adopted by major central banks globally,” the report said.
Weak global signals, fuelled by worries about the US Federal Reserve’s continued aggressive policy leading to rate hikes, and its effect on global economic growth, left markets on the edge. However, FIIs became net buyers in April, indicating a change in trend due to decreased apprehensions about the banking crisis and a rationalisation in market valuation, the report said.
The Indian equity markets experienced a downturn during the March 2023 quarter due to various global and domestic factors. The India-focused offshore funds and ETF category delivered a negative return of 4.1 per cent, but outperformed the MSCI India USD Index, which fell by 6.3 per cent. Around 125 funds outperformed both the category average and the MSCI India USD Index.
According to Morningstar’s estimation, there was a 6.9 per cent increase in assets in March 2023 for other regionally diversified equity funds and ETFs, which include Asia/Asia-Pacific funds, emerging-markets funds, and global funds. These funds had partial allocations to Indian equities.
The percentage allocated to Indian equities fell across global funds, emerging markets, and Asia/Asia-Pacific funds in line with the decrease in investment value, the report added.
