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    India-dedicated funds withdrew $2b in a month; top 10 largest offshore funds

    Synopsis

    The selling by offshore funds is triggered largely by hardening of bond yields in the US on account of expectations that inflationary pressure may build up.

    ETMarkets.com
    NEW DELHI: The domestic financial markets have seen large outflow of foreign portfolio investor (FPI) money over the past 30 days, given the twin impacts of higher yields in developed markets and a demonetisation drive back home. The outflows have been to the tune of nearly $1.4-2 billion.

    Listed funds in the EPFR universe invested in India have seen redemptions of $1.4 billion over the past four weeks. They saw inflow of $3.6 billion after the Brexit referendum of June 23, 2016 till the end of October 2016, Kotak Institutional Equities said in a note.

    “We note that the Indian market has underperformed its peers over the past one month and part of the correction has been due to the demonetisation drive of the Indian government,” it said.

    The selling by offshore funds is triggered largely by hardening of bond yields in the US on account of expectations that inflationary pressure may build up going ahead and the US Fed may hike rate at its forthcoming policy meeting in December.

    FIIs sold heavily in November. Outflows so far have been to the tune of $2.03 billion as of November 24, Morningstar India said in a report.

    Assets of India-focussed offshore funds and ETFs stood at $44.8 billion at the end of October 2016, which were higher than $44.4 billion recorded in September 2016.

    “Most likely, the recent outflow from FIIs and a fall in the market will have an adverse impact on the flows into India-focussed offshore funds and ETFs as well as their asset base," it said.

    The report said total assets of 10 largest India-focused offshore funds and ETFs at the end of September 2016 stood at $22.2 billion, which was higher than $21 billion inflow as of June 30, 2016, and $20.4 billion at the end of the March 2016 quarter.

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    The top 10 funds comprised three ETFs – iShares MSCI India, WisdomTree India Earnings ETF and Lyxor ETF MSCI India C-contributing about $6.8 billion to the total assets of top 10 funds.

    These funds constitute around half of the overall assets of the India-focussed offshore funds and the ETF universe. Except for one change, the list of the 10 largest India-focused offshore funds and ETFs remained unchanged this quarter from the previous quarter.

    This quarter, Nomura India Equity entered the list whereas Parvest Equity India CC moved out of the top 10 list of offshore funds.

    India-focused offshore funds and ETFs have performed better than the MSCI India USD Index over shorter as well as longer time frames.

    Riding the upswing in the Indian equity market, India-focused offshore funds and ETFs delivered an 8 per cent return during the September quarter, thus outperforming MSCI India USD Index, which grew by 5.9 per cent, said the Morningstar report.

    The category has performed well compared with the index over the one-year and three-year periods as well.

    Over a one-year period, the India-focused offshore funds and ETFs clocked a return of 9.5 per cent against 6.1 per cent delivered by MSCI India USD Index.

    Over a three-year period, the category clocked 17.0 per cent return, thus beating the 11.2 per cent return delivered by the index.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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