Indian markets experienced a slight recovery in foreign fund inflows during the week ending December 6, following consistent outflows over the past two months. This marks a reversal after over five weeks of net redemptions, influenced by China’s economic stimulus and anticipation of the US election.
A report by Elara Capital reveals that India-dedicated funds recorded $156 million in inflows, driven entirely by large-cap investments, following $1 billion in redemptions since October. However, mid-cap funds continued to face challenges, with outflows persisting for 22 consecutive weeks, amounting to $900 million. Analysts suggest the broader cycle of foreign inflows into India may have reached its peak, despite occasional surges.
In the broader emerging markets, China saw the largest outflows in the past five weeks at $11 billion, followed by India ($2.2 billion) and Taiwan ($1.4 billion). According to NSDL data, total equity flows into Indian markets in 2024 stood at ₹9,435 crore (~$1.1 billion) as of December 6. While September saw the highest equity inflows (₹57,724 crore or ~$7 billion), October recorded the largest outflows (₹94,017 crore or ~$11.4 billion).
Across all asset classes, including equities, debt, mutual funds, and AIFs, India recorded net inflows of ₹17,460 crore ($11.4 billion), while October saw the steepest outflows of ₹96,358 crore (~$11.7 billion).
Globally, the US continued to dominate capital flows, with $9.9 billion entering US funds this week, following $8 billion the previous week. Mid- and small-cap US funds saw steady growth, attracting $611 million and $4.6 billion, respectively. Emerging markets like China, Hong Kong, and South Korea saw modest inflows, while developed markets like Europe and Japan faced substantial outflows, reflecting investor caution. France led the outflows with $625 million, followed by the UK ($372 million), Germany ($320 million), and Japan ($267 million).
Riskier assets such as junk bonds maintained strong investor interest, and commodities saw their third consecutive week of positive inflows, although long-term momentum in this category remains weak. The report highlights that commodity investments are nearing historical lows seen during previous market turning points, signaling potential shifts ahead.
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