Emerging market funds have seen a major outflow in the week ended October 14. According to Emerging Portfolio Fund Research, investors pulled out a net $1.15 billion from emerging market equity funds in the last week -- the first weekly outflow since August 3.
India, however, bucked the trend and recorded inflows of $109.4 million even at a time when the Indian fund performance for the week slipped 3.58 per cent, worse than the positive 2.70 per cent return delivered by emerging market equity funds. So far this year, India funds have crossed the $2-billion mark in net inflows.
"Investors lost some of their appetite for risk in the latest week due to inflation and growth numbers in the US, and moved out of emerging market funds. Some of those flows were redirected to the perceived safety of global equity and bond funds," said Brad Durham, managing director of EPFR.
Even as money-flows into India were strong last week, foreign institutional investors were on the selling side. In October, FIIs were sellers to the tune of Rs 3142 crore (Rs 31.42 billion) in cash and futures segments. In the cash segment alone, they sold stocks worth Rs 964 crore (Rs 9.64 billion).
"The rupee depreciating is a negative. Plus foreign investors realise that fresh money pumped in the correction phase will not give them returns as high as they used to earn," said Ambareesh Baliga, vice president, Karvy Stockbroking Limited.
"Moreover, many of these funds are hedge funds which enter and exit quickly depending upon the market turn," he added.
According to market sources, several European and US funds have been on a selling spree for the last couple of trading sessions.
According to EPFR, money has moved out of all emerging market equity fund groups except Asia ex-Japan funds. "Even Asia funds would have been under the water if not for the resilient India equity funds, which defied the trend," said EPFR in a report.
Japanese equity funds continued to attract new money but the pace of inflows has slowed compared with previous weeks. The US and Europe equity funds sustained more outflows. Investors pulled out $736.2 million from US equity funds during the week.
These funds have sustained $5.7 billion in net outflows so far this year.
The biggest outflow came from GEM (global emerging market) equity funds, which shed $993.3 million, largely due to a $990-million outflow from a single fund. A pair of BRIC (Brazil, Russia, India, China) equity funds were among the top three GEM funds getting inflows during the week and taking in a combined $52.3 million.
EMEA equity funds and Latin America equity funds reported outflows of $198.8 million and $51.6 million, respectively.
