Foreign flows continue to chase India, Japan and US, small-cap funds see big surge

Global investors continue to pour money into India and small-cap flows have been expanding since the start of the calendar year 2024, according to data analysed by Elara Capital. 

The last week saw an inflow of $549 million into India-dedicated funds, led by large-cap funds. Out of this inflow, $120 million was from US investors and $145 million from Japan investors. 

"We are seeing the momentum of inflows sharply expanding into India dedicated Smallcap funds. There was a round of inflows in these funds in the Aug-September 2023 period. However, the recent momentum in small-cap stocks has led to another round of bigger inflow from Foreign investors. In the past five weeks, $212 million have come into India Smallcap funds," said Sunil Jain of Elara Capital. 

Among global sectors, IT flows remain the strongest. Global financial flows again recovered after two weeks of slowdown. Industrials also continue to witness inflows. Recovery in global bonds, largely high-yield bonds continue.

China has witnessed the largest inflow of funds by domestic investors in the last eight years. 

"Largest inflows since 2015 of $12 billion seen in Chinese equities by domestic investors. Flows from domestic investors (Chinese investors) in China have remained positive throughout the correction which began in CY2022. However, the weekly pace of inflow was between $1.2-$1.5 billion, which expanded to 8-year high of $12 billion in the previous week. Foreigners have been exiting China since August 2023 and shifting a big portion of that liquidity into India. Inflow in China was across sectors but largely into Industrials, IT, Staples and Discretionary," said Jain.