India-focused funds witness outflow of $455 mn in May
New Delhi: India-focused funds witnessed the outflow to the tune of USD 455 million last month amid concerns over domestic economic growth and depreciating rupee, says a report.
This was the fifth largest money withdrawal among the emerging markets.
According to a report by Kotak Institutional Equities, funds dedicated to all the eight emerging markets were in negative in May. These funds together witnessed a pull out of USD 4.44 billion last month.
The exchange traded funds (ETFs) constituted a significant portion of the total outflows in the emerging countries, which stood at USD 2.76 billion, the report noted.
Among the individual countries, China-dedicated funds saw an outflow of USD 1.29 billion, followed by Brazil (USD 1.26 billion), Russia (USD 697 million), South Korea (USD 561 million) and India (USD 455 million).
Funds-focused to Indonesia, Thailand and Taiwan taken out money to the tune of USD 78 million, USD 52 million and Taiwan USD 41 million, respectively.
Moreover, in the last three months, barring Thailand, funds dedicated to all other emerging markets have taken out capital.
Market experts attributed the outflow to a slew of reasons such as depreciating rupee, high fiscal and current account deficit as well as lack of reform momentum.
India dedicated exchange traded funds (ETFs) have seen a strong outflows of USD 361 million last month because of depreciating rupee and sluggish global market scenario.
"Retail investors outside India subscribed to ETF and the retail money flowed into the country through ETFs. These fund flows affects the market movements, when the market sentiment is good, ETF flows follow suite and vice-versa," a market analyst said.
Meanwhile, as per SEBI data, Foreign institutional investors (FIIs) pulled out funds of Rs 347 crore from the equity markets in May. This was the second consecutive withdrawal as FIIs had pulled out Rs 1,109 crore from the stock market in April.
"Foreign investors are staying away from the Indian equity market, despite an attractive valuation, mainly on account of weakness in rupee, which is hovering around the 56-level against US dollar," a broker said.