Foreign fund allocations to Indian stocks are finding their way to the United States, According to a report by Elara Capital, most of the inflows into US funds in the last three weeks are out of China, India, Taiwan, and South Korea with most currencies depreciating against the US dollar. The brokerage also said retail flows from Japan to India have turned negative for the first time since January 2018.
India-dedicated funds saw an outflow of $302 million last week, the largest since June 2022. In addition, the total outflow from India, including dedicated and allocation funds, saw an outflow of $569 million, the largest since March 2022, the note said. The global fund flow data suggests that one big cycle of foreign funds allocation into India could have come to an end, and the trend is seen remaining soft for a longer time, Elara said.
Currently, the Yen-unwind trade is only visible in India. Japanese flows to the US continue at a strong pace, the brokerage said. In the latest cycle, which started in November 2022, India saw an inflow of $8.6 billion from Japanese retail funds and $2.1 billion from Japanese institutional funds.
The re-election of Donald Trump as the US President prompted an inflow of $110 billion into the US in three weeks. Elara Capital in its note said that last week saw an inflow of $57.6 billion into the US, the largest weekly number in the history of EPFR, an institution that tracks the movement of money via fund flows. Fund houses based in Canada and Japan investing in the US got inflows of $2.6 billion each. The global environment is still not showing a breakdown in risk appetite, although the momentum has slowed down, Elara said.