Mumbai, Sept. 9: The enthusiam of overseas exchange traded funds (ETFs) for India remains high amid economic slowdown, inflation, high interest rates and a policy paralysis.
The rising interest in ETFs is being cited as one of the reasons behind the robust FII presence in the country. FIIs have ploughed in $12 billion so far this calendar year betting on attractive valuations and reform measures. This has resulted in India being one of the best performing markets around the world this year.
However, even as foreign ETFs continue to shovel funds, other FIIs are booking profits.
ETF is a financial instrument or a basket of securities that are traded on an exchange. According to the foreign fund flow tracker of Kotak Institutional Equities, emerging markets witnessed ETF interest as of August 29, and India was one of the beneficiaries.
Inflows from these funds stood at $121 million for the month even amidst outflows, if one takes into account all FIIs. The report said ETFs had put more than $1.2 billion into India equities over the past 12 months. ETF flows into India for the month were, however, lower than that of China, Korea, Brazil and Russia.
According to data, WisdomTree India Earnings Fund received the most inflows among ETFs. About $65 million came into the fund in August, taking the total to $152 million for 12 weeks.
Aberdeen Global Indian Equity Fund, HSBC GIF Indian Equity Fund, JF India Fund, Lyxor ETF MSCI India, WisdomTree India Earnings Fund, The India Fund Inc and JP Morgan India Investment Trust Plc are some of the largest India-dedicated funds. Among them, Aberdeen Global Indian Equity Fund has the highest asset under management (AUM) at over $4 billion, while HSBC GIF Indian Equity Fund has assets of over $3 billion.
According to experts, while the rise in ETF flows could be because of attractive valuations and a strong global liquidity situation, these flows are volatile in nature.