In 2023, India emerged as a major beneficiary of global liquidity, with a substantial $15 billion flowing into dedicated funds for Indian Equities, according to a report by Elara Capital.
The country has secured it's position among the top recipient alongside US, Japan and Hong Kong, while China followed in the fifth spot, trailed by Brazil and Mexico.
Until September 2023, mid-cap funds dominated the inflows, constituting nearly 40% of total India funds. However, in the last three months, foreign mutual fund inflows shifted their focus to large cap funds, as revealed by the report.
"In CY-23-US, India, and Japan have been the biggest recipients of foreign flows. Outflows, were witnessed across Europe. Barring India and foreign flows have already turned weak for most countries in the second half of 2023", asserted Sunil Jain of Elara Capital
The momentum continued into January 2024, witnessing an additional influx of $270 million into Indian equities this week, following previous week's inflows of $450 million and $524 million. Notably, the majority of these inflows persisted to be directed towards large-cap funds, with a significant portion originating from US-domiciled funds.
Comparitively, China experiences weakened foreign flows in 2023, marked by a substantial redemption in the second half. A significant share of this liquidity found it's way to India, resulting in a 21% increase in India's NAV, while China faced a decline of 16% in the same period.
Analyizing global sectors, IT recieved the largest inflows in CY23, followed by consumer staples and industrials. Meanwhile, energy and utlities witnessed net outflows.
The report highlighted India's allocation in Global Emerging Market(GEM) funds reaching a historical high of 16.9%, in october 2022.
The coming months will be crucial, to observe whether Foriegn Institutional Investors (FIIs) continue to increase their allocation to India, while China struggles with a decreased share in GEM funds, as outlined in the report.
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