Net outflows of $1.28 billion were recorded in the India-focused offshore fund and exchange-traded fund (ETF) category in January-March It was much higher than net outflows of $435 million in the quarter ended December 31.
The category saw net outflows of $3.47 billion in calendar year 2021, which was lower than the $7.72 billion in calendar year 2020.
Net outflows of $800 million were in the India-focused offshore funds category during the quarter under review. It was significantly higher than the $638 million recorded during the quarter ended December 31.
The India-focused offshore ETF market, which saw net inflows of $203 million in December. It saw net withdrawals of $475 million in the quarter ending March 2022.
Further, given the net outflows and correction in the markets, especially in the mid- and small-cap space. The asset base of India-focused offshore fund and ETF category declined by 7.3% from $50.4 recorded in the previous quarter to $46.7 billion.
“Given foreign institutional investors’ (FIIs) risk-averse posture this year. They chose to redeem assets from the ETF market as well. It because it offers a relatively easy entry and exit option,” morning star reported.
Market Driven by Geopolitical Tensions
During the March quarter, the market was largely driven by rising geopolitical tension. It was due to the war between Russia and Ukraine. The rate hike by the US Federal Reserve as well as hawkish guidance of more aggressive rate hikes. Rising cases of coronavirus in some parts of the world, volatile crude prices, high global as well as domestic inflation.
The outcome of state elections, in which the incumbent government won four out of five states. It provided some relief to markets.
As a result, while the S&P BSE Sensex finished the quarter 0.54 percent higher, the S&P BSE Midcap Index and S&P BSE Small Cap Index both declined 3.45 percent and 4.22 percent, respectively.