India focused funds see net inflows after 18 months

A strengthening rupee has helped as these funds post net gains the last month

After many months of net outflows, India focused offshore funds and ETFs have seen their first monthly net inflows. In the month of September 2013, India focused funds received a net inflow of around $33million. On average, these funds were losing net outflows between $300-500 million in the past year, as per data from Morningstar.   

In what seems to be a reversal of trend, net outflows has paused for now as foreign investors have been looking to park their money outside of the dollar in recent times. Risk appetite among global investors seems to be coming back as the US dollar has declined against other major global currencies. Says Dhruva Chatterjee, senior analyst, Morningstar India: “This could be probably due to the Fed taper which may have brought back some risk appetite among global investors.”

Bellwether Sensex was up 3.7% in the last month. Most indices including Capital Goods, Bankex, Infrastructure among other indices were in the green this past month.

The rupee’s appreciation has also helped the performance of these foreign funds. India-based foreign funds delivered average returns of almost 12% in the month of September, which is the best monthly return in a year. The rupee has appreciated nearly 6% since end-August.

Inflows have been strong into emerging market equities and largely ETFs as global investors have been moving away from the dollar on the back of the debt ceiling deadlock and the postponement of the Fed’s QE tapering. As per Morningstar Asset Flows data, Emerging market ETFs saw a net inflow of $5.3 billion in the month of September 2013.

All but a few of the India focused offshore funds have underperformed in the past one year.