Offshore India funds, ETFs pump in USD 6.5 bn in 2017

India-focused offshore funds and exchange-traded funds (ETFs) have pumped in USD 6.5 billion in 2017 which is the highest ever annual inflows, reflecting India's attractiveness as a long-term investment destination.
This comes after a pull out of USD 2.2 billion in 2016, according to a Morningstar report.
Offshore India fund -- not domiciled in India -- receives flow from overseas investors and in turn, invests the money in Indian markets. India-focussed offshore funds as well as ETFs are a subset of the overall foreign portfolio investor (FPI) flows.
As per the report, India-focused offshore funds invested USD 5.75 billion last year, while those of ETFs witnessed an infusion of USD 730 million, taking the total to USD 6.5 billion.

The previous best was net inflow of USD 5 billion in 2009 when the equity markets witnessed sharp recovery after 2008 downfall.
The key trend during the year 2017 was the continuous flow of long-term money into Indian equity markets despite short-term money exiting at various points in time.

While out of 12 months, offshore ETFs witnessed net outflow in 6 months including in December; while offshore funds did not see any outflow.
"This also establishes the fact that foreign investors continue to view India as a long-term investment destination and despite intermittent hiccups, this view has remained intact," said Himanshu Srivastava, Senior Analyst Manager Research at Morningstar India.

"From the overall composition of India focused offshore funds and ETFs, it is apparent that the funds are positioned to benefit from an uptick in the country's economic cycle. Now this composition has not materially changed over the last 3-4 years; it is not going to dramatically change anytime soon," he added.
Given that the 2019 general election is not far, the expectation of some more economic reforms from the government would also be high, and FPI will focus on the steps taken by the government in this direction, he noted.