Offshore India funds, ETFs see $294-million inflows in Apr-Jun

India-focused offshore funds and ETFs registered inflows worth 294 million during the first quarter of this fiscal on improved investor sentiments after formation of a stable government at the Centre.

An offshore India fund is one that is not domiciled in India but invests primarily in Indian markets.

This net inflows were seen after witnessing outflows of $909 million in the January-March quarter.

According to a report by mutual fund tracker Morningstar, India-focused offshore funds and exchange-traded funds (ETFs) registered net inflows of $294 million in the April-June quarter this year, compared with a net outflow of about $909 million in the preceding three months.

There was an outflow of $1 billion during the quarter and a net infusion of $1.29 billion into offshore funds and ETFs.

"The inflows primarily are a result of improved investor sentiment following the recent political change that resulted in a pro-growth and pro-reform government being formed (at the Centre) with an absolute majority," the report said.

"However, the fact that these inflows came through the ETF route suggest they may be more short term in nature," it added.

Assets of all India-focused offshore funds and ETFs rose by 10% to $36 billion during the three months ended June 30, 2014. Currently, ETFs form $7.9 billion of these assets, while $28 billion is in the form of India-focused offshore funds.

The total assets of these funds and ETFs are now down by a massive 36% from the peak of about $55.7 billion at the end of 2010.

Besides, overseas investors infused a net inflow of $10 billion into Indian equities in 2014, of which about $6.3 billion came in the second quarter.

India-focused offshore equity funds and ETFs delivered an average return of 16.03% (in $terms) during the quarter, outperforming the MSCI India Index by 3.27%.

The report said that Asia funds (excluding-Japan), emerging market funds, ETFs and other global funds with partial allocations to India have all increased their weightings to the country.

"This is a combination of stock market performance and the inflows from these funds into Indian equities during the quarter ending June 2014," it added.