India-Focused Offshore Funds, ETFs See Record Inflows In 2024: Morningstar

India-focused offshore funds and exchange-traded funds logged a record net inflow of $23.4 billion in 2024, despite witnessing a net outflow of $954 million in the December quarter, according to a report by financial services firm Morningstar.

The outflow in the October-December period had snapped a nine-quarter streak of net inflows under the category.

From July to December, India-focused offshore funds and ETFs saw net inflows of $5 billion. Of this, the offshore funds received $4.6 billion and ETFs received $391 million, as per the report.

Morningstar pointed out the sharp fluctuations seen in this category in the second half of the last calendar year. In July-September period, the India-focused offshore funds witnessed net inflows of $4.9 billion. However, it reported a net outflow of 238 million in the October-December period.

Similarly, India-focused offshore ETFs saw net inflows of $1.1 billion in the September quarter but recorded net outflows of $716 million in the December quarter.

Despite the fluctuations, the asset base of India-focused offshore funds and ETFs grew slightly from $102.3 billion in June to $103.4 billion in December 2024, the report said.

Of the total asset base of $103.4 billion, India-focused offshore ETFs accounted for $28.7 billion, marking a decline from $29.9 billion in June 2024. The share of offshore funds, however, increased to $74.7 billion in December from $72.5 billion in June.

During the same period, the market share of ETFs declined from 29.2% to 27.7%, while that of offshore funds increased from 70.8% to 72.3%, the report said.

"Most India-focused offshore funds are actively managed, with expense ratios significantly higher than those of ETFs. The continued popularity of these funds, despite higher costs, suggests that many foreign investors prefer active management over passive strategies when investing in India," it further added.