India-focused offshore funds, ETFs see $1.5-billion outflow in Q1

India-focused offshore funds and exchange-traded funds (ETFs) continued to see net outflow in the June quarter (Q1). 

These funds saw a net outflow of $1.5 billion, as against net outflow of $5 billion seen in the previous quarter, according to a report released by Morningstar. 

This was the ninth-consecutive quarter of net outflows for the category. 

While India-focused offshore funds witnessed net outflows of $698 million through the quarter, India-focused offshore ETFs witnessed a net outflows of $776 million. Recovery in equity markets in Q1 improved the asset base for these funds. 

As of June, assets stood at $33.8 billion, up 13.3 per cent from $29.8 billion in the previous quarter. The report observed that investors have recently been extensively using ETFs to easily move in and out of India’s equity markets, in line with their fast-changing view on the investment opportunity offered by Indian markets. 

Actively-managed funds tend to have higher expense ratios and also charge investors for early exits. However, flows into such funds are considered more long-term in nature. Analysts say sizeable net outflows from India-focused funds indicate that foreign investors with long-term investment horizons are adopting a cautious stance on India.