India-dedicated funds see record $2.4-bn inflows in just two weeks

For foreign investors, India has suddenly become the market to be as both India-dedicated funds and SEBI-registered foreign portfolio investors (FPIs) have been pumping in huge amount of funds in the domestic stock market.

Global liquidity flows, as shown by EPFR’s Fund Flows and Allocations Data, indicate that $2.4 billion has been allocated to India-dedicated funds in just two weeks.

This unprecedented quantum of fund flows, according to market participants, is primarily on account of the clarity emerging after the election results with the BJP-led NDA coming back to power and the market betting big on policy continuity.

According to Elara Capital’s Global Liquidity Tracker report, the unprecedented inflows into India are mostly from US investors and the shift from China to India is gaining momentum.

“$2.4 billion have been allocated to India-dedicated funds in just two weeks, which is the fastest momentum seen in history. A lot of funds were sitting on the side lines waiting for clarity on the election outcome. We are seeing a crowded move to deploy into India over the past two weeks,” stated the report.

The largest inflows were from US investors ($700 million), followed by Ireland ($447 million) and Japan ($433 million). Interestingly, there were also $130 million inflows from Korea. All India inflows remain in large-cap funds, with no revival of flows into mid- and small-cap funds yet, highlighted Elara Capital’s report.

Key data points from the report include the shift of foreign funds from China into India accelerating further over the past three weeks. China funds saw FII outflows of $2.3 billion in the past three weeks.

Incidentally, after a long time, Japan flows also turned negative over the past three weeks with an outflow of $753 million. Foreign outflows also accelerated from Taiwan and Brazil. Most of these funds seem to have moved into India.

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“We can see some signs of FOMO developing among foreign investors, where many fund managers are shifting money into India at a rapid pace while pulling out funds from various countries,” said Sunil Jain, Head of Quantitative & Alternatives at Elara Capital.

Meanwhile, FPIs, who have mostly been net sellers of Indian shares in the recent past, seem to have also changed tracks by buying stocks worth nearly $1.4 billion in the last five trading sessions till Friday.

This is in sharp contrast to their activity during the last couple of months as data from NSDL clearly shows that foreign investors were net sellers at $1.04 billion in April, followed by $3.06 billion in May.

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