EMs attract fresh capital of $3.5 bn in week ended Jan 25

Emerging markets attracted fresh capital of $3.5 billion in equity funds for the week ended January 25, the highest in 42 weeks, global fund-tracking agency EPFR said.

During the week, overall equity funds absorbed a net $8.62 billion, with emerging markets equity funds accounting for nearly half of it.

"...Investors recovered their appetite for Asia's story and factored in the monetary easing they now expect from the European Central Bank and the US Federal Reserve," the report said.

"In addition to growing faith in a 'soft landing' for China's economy, investors are responding to some big sell- offs last year and the general shift among emerging markets to more accommodative fiscal and monetary policy," it added.

Most of such funds invest in India as FIIs (Foreign Institutional Investors) and the capital flows through this route are a key factor in the stock market trends here.

As per the data available with capital market regulator Sebi, FIIs made a net investment of $914 million in Indian equities during the week ended January 25.

Market analysts believe that rupee strengthening, easing concerns over inflation and economic growth have helped foreign investors step up buying in recent sessions in India.

"India joined the ranks of major emerging market central banks that are easing monetary policy during a week when flows into India equity funds hit a 54-week high," EPFR said.

Besides, funds focused to BRIC (Brazil, Russia, India and China) equity funds posted back-to-back weeks of inflows for the first time since early April.

In terms of sectors, energy and financial space posted inflows during the week under review, while funds dedicated to healthcare, technology and commodities saw an outflow during the period.