Outflows seen in India-focused offshore funds and ETFs amid high volatility: Morningstar report

According to a Morningstar analysis, net outflows in the India-focused offshore funds and ETF category continued in the quarter ending March 2022. This was the fund's 16th straight quarter of net outflows. In the March quarter, net outflows increased to $1.28 billion, up from $435 million in the previous quarter ending December 2021.

A fund that is not domiciled in India but invests largely in Indian stock markets is known as an offshore India fund.

Net outflows of $800 million were reported in the India-focused offshore fund's category during the quarter under review, which was significantly higher than the $638 million recorded during the quarter ended December 31. The category saw net outflows of $3.47 billion in  2021, which was lower than the $7.72 billion in  2020.

The Indian markets have been extremely volatile recently, making investors nervous. The large-cap segment outperformed its mid and small-cap counterparts during the quarter. According to the Morningstar research, while the S&P BSE Sensex rose by 0.54 percent during the quarter, the S&P BSE Midcap and S&P BSE Small-Cap Indexes fell by 3.45 percent and 4.22 percent, respectively.

The India-focused offshore ETF market, which saw net inflows of $203 million in December, recorded net withdrawals of $475 million in the quarter ending March 2022.

"Given Foreign Institutional Investors (FIIs) risk-averse posture this year, they chose to redeem assets from the ETF market, because it offers a relatively easy entry and exit option," Morningstar India stated in the study.





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