The robust net inflows and a strong rally in the Indian equity markets drove the asset base of the India-focused offshore fund and ETF category to swell by 19.2 percent to $50.6 billion in the June quarter from $42.4 billion in the previous one according to a recent report by Morningstar India.

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India-focused off-shore funds are international mutual funds and ETFs that invest in Indian equities.

According to the report, after 17 consecutive quarters of net outflows, the international mutual funds and ETF segment focused on Indian equities, has been witnessing net inflows consistently since the quarter ended September 2022. The report suggested that the category is now witnessing four consecutive quarters of net inflows with a net inflow of $3.19 billion through the June 2023 quarter.

The report also suggested that the India-focused offshore ETFs also received net inflows of $764 million, sharply higher than the net inflows of $489 million recorded in the previous quarter.

Of the overall current asset size of $50.6 billion, India-focused offshore ETFs accounted for $11.5 billion, whereas India-focused offshore funds accounted for $39.05 billion. The Morningstar report suggested that the market shares of India-focused offshore ETF and India-focused offshore funds in the overall category remained unchanged from the previous quarter at 22.8 percent and 77.2 percent, respectively.

There has been a sharp drop in the number of funds in the category witnessing net outflows, and the quantum of net outflows, which points towards a strong positive trend and sentiments among foreign investors towards Indian equity markets after a long gap.

The assets of the 10 largest India-focused offshore funds and ETFs shot up by 21 percent during the quarter ended June 2023, to $20.7 billion from $17.1 billion in the previous quarter. These funds account for almost 41 percent of the India-focused offshore fund and ETF category's assets.

During the June 2023 quarter, Kotak India Midcap A USD Acc received the highest net inflows of around $487 million, a huge jump in its net inflow numbers from the previous quarter when it received a net inflow of $55 million. This quarter witnessed a strong performance from the mid- and small-cap segments, and the fund benefited from this trend in the form of huge net inflows.

It was followed by SMDS High Growth India Mid-Cap Equity and iShares MSCI India ETF USD Acc, with net inflows of $297 million and $237 million, respectively.

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First Published:Aug 22, 2023 12:01 PM IST