India logs $435 million outflow of ETFs & offshore funds in Q3: Report

This was much greater than the $95 million outflows recorded for the fiscal quarter ending September 20, 2021.

As per the Morningstar research issued on Wednesday, India-focused overseas funds and exchange-traded funds (ETFs) saw a total outflow of USD 435 million in the three months ending December 2021, marking the 15th straight quarter of withdrawal.

This was much greater than the total outflows of USD 95 million recorded for the quarter ending September 2021.

The greater outflows during the quarter under evaluation might be ascribed to “heightened worries on both the global and local fronts, as well as the US Fed’s hawkish declaration that interest rates could be raised much sooner than expected.”

The offshore funds and ETFs focusing on India are some of the most popular investment vehicles utilized by international investors to engage in the Indian equities market. Net outflows from India-focused offshore funds and ETFs totalled USD 2.45 billion in the calendar year 2021, a significant decrease from the net outflows of USD 9.26 billion in the calendar year 2020.

During the three months ending December 2021, the India-focused offshore fund category saw a net outflow of USD 638 million, compared to a net inflow of USD 14 million the previous quarter. The category experienced a net outflow of USD 3.47 billion for the whole year of 2021.

In contrast, India-focused overseas ETFs had net inflows of USD 203 million during the quarter under evaluation, compared to total outflows of USD 108 million over the previous three months. The category experienced a net inflow of USD 1.01 billion between 2016 and 2021.

FLow into offshore funds are typically seen to be long-term in character, whilst flows into offshore ETFs are thought to be largely short-term.

Since February 2018, net outflows from offshore funds and ETFs have been constant. The fervour peaked in the March 2020 quarter, when about USD 5 billion departed the company’s coffers. This was the category’s largest quarterly net outflows.

During the June, September, and December quarters of 2020, as well as the March quarter of 2021, the severity of net outflows did show indications of easing.

However, when the second wave of the COVID-19 epidemic approached Indian shores, the rate of net withdrawals increased, and quite rapidly, in the India-focused offshore funds and ETFs category in the fiscal year ending June 2021, when it lost net assets of USD 1.55 billion.

However, when the circumstances improved, net outflows from the category fell substantially to USD 95 million in the quarter ending September 2021. The decrease in net outflows was caused by favourable confidence about the macroeconomic climate and the growth potential.

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