Listed global funds pour $1.3 bn into India's equity markets in September

Listed global funds poured $1.3 billion into India's equity markets in September despite rising bond yields and the hawkish commentary by the US Federal Reserve.

“Listed funds witnessed $1.3 billion of inflows in September, led by non-exchange traded funds (ETF) inflows of $933 million. India-dedicated funds witnessed inflow of $2.2 billion, led by non-ETF inflows of $1.7 billion, whereas global emerging market (GEM) funds saw outflows of $574 million, led by non-ETF outflows of $455 million,” said a note by Kotak Institutional Equities (KIE), quoting data from EPFR, a flow tracker.

The strong inflows from listed funds into the domestic markets come on the back of an increase in India’s weightage.

“Asia ex-Japan funds’ allocations to India increased to 17.8 per cent in September from 17 per cent in August, whereas allocations to India by GEM funds increased to 16.5 per cent in September from 15.8 per cent in August. Allocations by Asia ex-Japan non-ETFs to India increased to 18.2 per cent in September from 17.4 per cent in August; allocations to India by GEM non-ETFs increased to 15.2 per cent in September from 14.8 per cent in August,” said the note by KIE.

Interestingly, despite the strong inflows from listed funds, overall foreign portfolio investors (FPIs) pulled out nearly $500 million from the domestic equities, data provided by NSDL revealed.

The outflows—which were on account of selling by hedge funds and other funds not tracked by EPFR—were due to the risk off sentiment triggered by rising US yields.

The 10-year Treasury yield rose to as much as 4.69 per cent in September from a low of 3.97 per cent in August.

The KEI note says the divergence in overall FPI flows and EPFR activity was not just restricted to India but South Korea and Taiwan as well. However, there divergence between the two data sets isn’t that wide on a year-to-date basis.