India-focused offshore funds and exchange-traded funds (ETFs) registered outflows totalling USD 4.75 billion in 2013, despite overseas investors pumping in a staggering USD 20 billion into the country's market.
According to a report by mutual fund tracker Morningstar, India-focused offshore funds and ETFs had witnessed a cumulative net outflow of USD 1.8 billion during 2012 as against a net withdrawal of USD 5.4 billion in 2011.
Year 2013 saw the third consecutive yearly outflow.
During the entire 2013, the only net inflow was USD 33 million in September, which was the first monthly inflow since March 2012. For all other months during the year, there were net outflows from India-focused offshore funds and ETFs.
However, overseas investors infused a net amount of USD 20.1 billion into the Indian equities in 2013.
An offshore India fund is one that is not domiciled in India but invests primarily in Indian markets.
"The outflow in 2013 was mainly due to the poor performance of the Indian rupee and a weak macro-economic environment," the report said.
The rupee plunged to a record low of 68.85 against the US dollar in late August. Emerging market currencies suffered after the US Federal Reserve said that it would start reducing its quantitative easing programme.
However, the rupee managed to recover significantly by the end of the year, helped by measures taken by the government and the RBI.
"India-focused offshore funds and ETFs registered a net outflow of USD 4.75 billion for 2013, with the fourth-quarter outflow rising to USD 1.3 billion from about USD 0.7 billion in the third quarter of the calendar year," the report said.
Assets of all India-focused offshore funds and ETFs declined to USD 30.1 billion in 2013 from USD 37 billion in the preceding year. The total assets of these funds and ETFs are now down by a massive 46 per cent from the peak of about USD 55.9 billion at the end of 2010.
