Most of the global markets also have been seeing this one way of move. So, the big question right now is how money is moving globally and what it is chasing in the equities.

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EPFR tracks this on a weekly basis.

According to EPRF Global’s Cameron Brandt, the flows this week went the other way. It was an inflow into emerging markets - equity funds of around $4.6 billion. But it's been very choppy over the past few weeks. And it's largely hinged on how people are feeling about China, on any given week. This current week of the $4.6 billion, about $3.3 billion went into dedicated China equity funds.

He further said, at the moment it is definitely the GEM funds that are more enthusiastic about India. Certainly, foreign domiciled dedicated India funds are struggling a bit, a lot of the investors don't seem to have moved on from the negative COVID story that India went through earlier this year. However, the Global Emerging Market (GEM) fund managers are definitely focused on the rebound that they're anticipating and the average allocation of those funds to India has been climbing steadily while their allocations to China have been dropping equally steadily.

When asked with regards to the MSCI emerging market index and India's weight were the GEMs overweight India in the index, he said, “ It is standing if I recall correctly, somewhere around 11 percent, and it's up from a recent low of around 8 percent. Still only a third of the average allocation at the moment for China. But as I said, the momentum has been very steadily on the increase, while China's allocation has equally steadily been dropping.”

When asked how the flows from India dedicated funds have panned out from the start of the year to now, Brandt said, “Earlier in the year, $100 million would come in a week to week, then we were sort of seeing weeks where maybe as much as $200-300 million would go out. Lately, the amounts have been smaller but they have been of trending in a positive direction. Although this latest week it was about $120 million out, the week before there were reasonably positive inflows.”

“The main takeaway for me is that they're not relentlessly negative. And I would expect with the levels of growth that are expected out of India, even with obviously that rough patch in the middle of the year, that there's going to be some sort of scrambling to catch up to make sure that at the end of the year, you can tell your clients that you have exposure to this fast-growing market, “said Brandt.

Is India likely to benefit from the regulatory crackdown seen in China? Brandt said that was the right thinking.

“The managers of the GEM funds, who sort of take a broader perspective have been rotating exposure out of China, especially into Taiwan, India and Korea. Investors -- a lot of them are not professional, so they don't tend to move as quickly and China's story has been so relentlessly pushed in recent years, that it is quite hard to let go, especially when some of the sort of more attractive tech plays all of a sudden valuations, which if you can shoot out, the sort of sound and fury over the crackdown do start to seem very attractive. So, I think it's going to take a little more time for people to make up their minds about just how far-reaching the crackdown is.”

“The timing of that in some senses has been quite good if you don't want to disturb markets because it has occurred during the northern hemisphere summer when a lot of certain investors are off on holiday and not quite as engaged. When people get back after the Labour Day holiday here, they will start to form opinions and then act on them,” he added.

For the entire interview, watch the accompanying video

(Edited by : Anshul)