India-focused offshore funds and exchange-traded funds witnessed a net outflow of over $2 billion (about Rs 14,200 crore) in the three months through December 2019, making it the seventh consecutive quarter of withdrawal amid stuttering economic growth, says a Morningstar report.
In comparison, a net outflow of $1.3 billion was witnessed during the quarter ended in September. India-focused offshore funds and ETFs are some of the eminent investment vehicles through which foreign investors invest in Indian equity markets.
Of the total quarterly net outflow of $2.1 billion, India-focused offshore ETFs registered a net withdrawal of $321 million, while the remaining amount was withdrawn by India-focused offshore funds, the report noted. Flows into offshore funds are generally considered to be long-term in nature, whereas flows into offshore ETFs indicate predominantly short-term money.
"The higher net outflows from India-focused offshore funds compared with India-focused offshore ETFs indicate that foreign investors with long-term investment horizons have been adopting a cautious stance towards India, which is a concern but not entirely unexpected given the country's current economic landscape," the report said.
"The future trend of the flows in this category would revolve around the domestic economy and how the government's efforts to revive the dwindling economy bear fruit," it added. Despite continuous net outflows, a spike in the performance of equity markets led to a marginal increase in the assets of India-focused offshore funds and ETFs.
During the quarter, their asset base rose to $49.4 billion from $49.1 billion in the previous quarter. Of the overall asset base of $49.4 billion, India-focused offshore ETFs made up about $8.5 billion, whereas India-focused offshore funds accounted for $40.8 billion. Overall, the category witnessed net outflows of $5.8 billion in the year 2019, higher than $5.2 billion seen in 2018.
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