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India-focused offshore fund, ETFs see outflows amid high volatility: Morningstar report


The India-focused offshore funds and ETF category continued to experience net outflows during the quarter ended March 2022, according to a report from Morningstar. This was the 16th-consecutive quarter of net outflows for these funds. The quantum of net outflows shot up to $1.28 billion during the March quarter from $435 million in the previous quarter ended December 2021.

Given the net outflows and corrections in the markets, especially in the mid- and small-cap space, the asset base of India-focused offshore fund and ETF category declined by 7.3% from $50.4 billion recorded in the previous quarter to $46.7 billion.

India-focused offshore fund segment had a net outflow of $800 million during the March 2022 quarter, which was significantly higher than the net outflow of $ 638 million during the December 2021 quarter. Similarly, India-focused offshore ETFs also experienced net outflows of $ 475 million during the quarter ended March 2022, which was in stark contrast to the previous quarter when it received a net inflow of $ 203 million.

The Indian markets has been volatile lately, keeping investors on edge. Through the quarter, the large-cap segment outperformed its mid- and small-cap counterparts. While S&P BSE Sensex surged marginally by 0.54% during the quarter, S&P BSE Midcap, and S&P BSE Small Cap Indexes declined by 3.45% and 4.22%, respectively, says the Morningstar report.

The India-focused offshore funds and ETF category fell by 4.01% during the quarter, thus underperforming MSCI India USD Index, which fell by 1.81%.

The assets of other regionally diversified equity funds and ETFs dropped during the quarter ended March 2022 by 8%, from $9.90 trillion in the previous quarter to $9.1 trillion. Other regionally diversified equity funds and ETFs include Asia/Asia-Pacific funds, emerging-markets funds, and global funds. These are foreign funds that have a partial allocation to Indian equities.

The value of investment into Indian equities in regionally diversified funds also fell to an estimated $289 billion during the March 2022 quarter, compared with $304.5 billion recorded in the previous quarter, a fall of 5%.



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