India-dedicated funds pull out nearly $400 million in March, shows data

India-dedicated funds saw outflows to the tune of $394 million in March, taking total outflows in the first three months of CY19 to $1.4 billion, EPFR data compiled by Kotak Institutional Equities shows. Global emerging market (GEM) funds saw modest inflows of $110 million, taking the 2019 inflows to $2.04 billion. The estimated assets under management (AUM) of India-dedicated funds stood at $47.8 billion compared with $82.8 billion for GEMs.

EPFR fund-flow data primarily tracks mutual funds, ETFs, closed-end funds and variable annuity funds/insurance-linked funds. It does not include investments from hedge funds, proprietary desks and sovereign wealth funds, which is traced by the National Securities Depository (NSDL).

According to NSDL data, India received net foreign portfolio investor (FPI) flows of $6 billion in March. Typically, data provided by EPFR and NSDL are in sync. Experts say the bulk of the flows in March into domestic equities could have come from unconventional sources given the high discrepancy bet-ween EPFR and NSDL figures.

Indian markets had rallied 7 per cent in March, their best monthly showing in three years.

Overall allocation to India by Asia ex-Japan funds increased to 13 per cent in March from 11.8 per cent in February, while that by GEM funds increased to 10.1 per cent in March from 9.4 per cent in February.

The energy and the financials sectors have seen heavy buying in March, with flows to the tune of $1.07 billion and $3.3 billion, respectively. Financials have received inflows of $4.4 billion.

Most emerging markets saw outflows in the month of March, with South Korea seeing outflows of more than $1 billion and China $2.5 billion, the most among EMs. For a one-year period, however, China has seen the most flows totalling in excess of $20 billion.

Last year, flows into India were tepid as most FPIs had cut their ‘overweight’ stance on India to multi-year lows. How-ever, hopes of improvement in macro conditions and earnings growth have prompted foreign funds to turn positive on the country this year.

Recently, foreign brokerages such as Goldman Sachs and BNP Paribas upgraded their stance on India. Goldman Sachs cited “better December quarter earnings and a pick-up in FII positioning from lows” for its upbeat stance, while BNP Paribas cited stability in corporate-profit growth for its stance.