India-focused offshore funds, ETFs clock record net inflow of $23.4 billion in 2024

According to a report by financial services firm Morningstar, from July to December, India-focused offshore funds and ETFs saw net inflows of $5 billion. Of this, the offshore funds received $4.6 billion and ETFs received $391 million, as per the report.

India-focused offshore ETFs saw net inflows of $1.1 billion in the September quarter but recorded net outflows of $716 million in the December quarter.

Despite a challenging market environment, the asset base of India-focused offshore funds and ETFs saw a marginal expansion between July and December 2024, rising from $102.3 billion in June to $103.4 billion in December 2024--a modest increase of just 0.01 per cent.

"Between July and September, FIIs were aggressively buying, driven by political stability following the NDA government's third consecutive term, a stronger-than-expected June-quarter earnings season, and the initiation of the U.S. Federal Reserve's rate-cut cycle in September 2024," the report mentioned.

Increased India weightage in global indices, improved domestic growth prospects, and a surge in large IPOs further fuelled foreign inflows.

Offshore mutual funds form a vital component of total foreign institutional investment, apart from other large FIIs, such as offshore insurance companies, hedge funds, and sovereign wealth funds.

The trajectory of future flows will likely be influenced by global factors such as inflation trends, global economic growth outlook, US Federal Reserve's approach towards interest rates, geopolitical tensions, and the economic scenarios in the US and Europe.

US trade policy with rest of the world will also have significant impact on flows from foreign investors.

"It's important to note that India-focused offshore funds and ETFs are among the primary vehicles through which foreign investors participate in Indian equity markets," said the report.