FII outflows from India begin to ebb

India has witnessed net foreign institutional investment (FII) outflows from equities worth $281 million (Rs 1,379 crore) (at Rs 49.08 per dollar) for the month ended October 26, despite net exchange traded fund (ETF) flows into India seeing inflows of $61 mn (about Rs 300 crore) for the same period.

"However, two consecutive weeks of inflows probably indicate a change of trend," said Saifullah Rais, analyst of Kotak Institutional Equity (KIE) Research, indicating an emerging positive trend.

The same trend has been witnessed across many emerging market (EM) regions like China, Korea and Taiwan as well. Brazil ($749 mn) and Russia ($545 mn) have seen the largest outflows in October. On a proportional basis, Russia has seen the largest outflow in the last three months followed by Taiwan and China.

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The BRICs (Brazil, Russia, India and China) nations and Asian countries, including India, witnessed a net outflow in the one month, three months and six months timeframes, except Taiwan getting some respite in the six months' timeframe. The other Asian countries in the sample include Indonesia and Thailand.

During these timeframes, Indian equity markets saw outflows of $281 mn, $2,083 mn (over Rs 10,200 crore), and $3,064 mn (over Rs 15,000 crore) respectively, while that of 12 months was at $34,454 mn, according to data compiled by KIE Research.

This highlights that the maximum outflow of foreign funds was seen during the two months of August and September. The negative FII sentiment was also reflected in the movement of the bellwether BSE Sensex, which had slipped by 9.58 per cent from 18,197.2 points at the end of July to 16,453.76 at end-September. The Sensex closed at 17,562.61 points last Friday.

However, larger India-focused funds continued to witness outflows as Aberdeen Global India Fund and HSBC GIF India Equity Fund top the list on a three-month basis. WisdomTree India Earnings Fund has witnessed its assets under management (AUM) shrink by 26 per cent in the same period. In the Asia ex-Japan universe, the largest funds saw AUM rise by six per cent during the month. On the emerging markets front, iShares and Vanguard continue to see inflows as the cumulative AUM for these two ETFs reached $80 bn (Rs 3.93 lakh crore), KIE Research said, citing data from Emerging Portfolio Fund Research (EPFR) and other agencies.

But there is some good news as regards fund allocations under all categories of FIIs by end-September, for which the latest figures are available. "Allocations to India moved up 0.6 per cent in September from 10.3 per cent to 10.9 per cent," said KIE Research.

Cash balances in Global Emerging Markets (GEM) and BRIC funds stand at 2.1 per cent (up from 1.6 per cent) and 3.4 per cent (up from 2.5 per cent), respectively. BRIC funds saw India allocations rise from 13.6 per cent to 14.7 per cent, while GEM allocations to India went up from 8.7 per cent to 9.3 per cent.

Within the Asia ex-Japan funds, China has seen the maximum reduction in allocations over the last three months, down from 18.6 per cent to 17.7 per cent.

Courtesy: Mail Today