India-focused funds witness outflow of $455 mn in May

India-focused funds witnessed outflow to the tune of $455 million last month amid concerns over domestic economic growth and depreciating rupee, says a report.

This was the fifth largest money withdrawal among emerging markets. According to a report by Kotak Instit-utional Equities, funds dedicated to all the eight emerging markets were in the negative in May. These funds together witnessed a pull out of $4.44 billion last month.

Exchange-traded funds (ETFs) constituted a significant portion of the total outflows in emerging countries, which stood at $2.76 billion, the report noted.

Among the individual countries, China-dedicated funds saw an outflow of $1.29 billion, followed by Brazil ($1.26 billion), Russia ($697 million), South Korea ($561 million) and India ($455 million).

Funds focused to Indo-nesia, Thailand and Taiwan taken out money to the tune of $78 million, $52 million and Taiwan $41 million, respectively. Moreover, in the last three months, barring Thailand, funds dedicated to all other emerging markets have taken out capital.

Market experts attributed the outflow to a slew of reasons such as depreciating rupee, high fiscal and current account deficit as well as lack of reform momentum. India dedicated ETFs have seen a strong outflows of $361 million last month because of depreciating rupee and sluggish global market scenario.

“Retail investors outside India subscribed to ETFs and retail money flowed into the country through ETFs. These fund flows affect the market movements, when the market sentiment is good, ETF flows follow suit and vice versa,” a market analyst said.

Meanwhile, according to Sebi data, Foreign institutional investors (FIIs) pulled out funds of Rs 347 crore from the equity markets in May. This was the second consecutive withdrawal as FIIs had pulled out Rs 1,109 crore from the stock market in April.

“Foreign investors are staying away from the Indian equity market, despite an attractive valuation, mainly on account of weakness in rupee, which is hovering around the 56-level against US dollar,” a broker said. PTI