India-focused ETFs are primary sellers in August
While foreign portfolio investors (FPI) have remained heavy sellers in the domestic equity markets over the last two months amidst the escalation of geo-political tension, India focussed offshore funds are still seeing net inflow of funds, though at a lesser scale suggesting that a significant chunk of the selling is done by India focussed exchange traded fund (ETF), which are short term in nature.
FPIs have offloaded equities worth `12,770 crore in August, their highest selling since January 2017. In September till date, they are net sellers to the tune of `5,492 crore according to the data available with the National Securities Depository Ltd (NSDL).
According to Morningstar, Indiafocussed offshore funds, which are longer term in nature, witnessed netinflow of $179 million in August whereas the Indiafocussed ETFs saw a net outflow of $39 million.
“Indian stock markets have done significantly better over the last few years. This coupled with rupee appreciation has given overseas investors a good profit booking opportunity. If seen from the perspective of global risk aversion, for them it is a good opportunity to capitalize on,” said Himanshu Srivastava, senior research analyst at Morningstar Investment Advisors adding that the selling momentum is expected to continue if the tension between the US and North Korea aggravates further.
“We are yet to see the kind of growth that was expected in the domestic economy. India is one of the many investment destinations for foreign investors and they continue to compare it with other countries with regards to risk reward profile. So India has to perform significantly better to continue getting its share of foreign money,” he added.
Morningstar highlighted that China is the most preferred country for both the Asia Pacific Funds and Emerging market funds.
Chinese companies accounts for 27 per cent of the Asia Pacific Funds portfolio and 23 per cent of emerging market funds.
In the Asia pacific Fund, South Korea comes in second with 12 per cent allocation and India comes at third with 11 per cent allocation.
In the Emerging markets funds — Taiwan, South Korea and India all have allocation in the range of 10-10.5 per cent.