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

IANS February 19, 2025 207 views

India's offshore funds have witnessed an unprecedented financial influx in 2024, marking a significant milestone in foreign investment. The record $23.4 billion net inflow signals strong global confidence in India's economic potential. Political stability, robust corporate earnings, and increased weightage in global indices have been key drivers of this trend. Despite market challenges, foreign institutional investors remain optimistic about India's economic trajectory.

"FIIs were aggressively buying, driven by political stability" - Morningstar Report
New Delhi, Feb 19: India-focused offshore funds and exchange-traded funds (ETFs) registered a record net inflow of $23.4 billion in 2024, despite witnessing a net outflow of $954 million in the December quarter.

Key Points

1

Record $23.4B net inflow in India-focused offshore funds

2

Foreign investment driven by NDA government's stability

3

Global indices boost Indian market attractiveness

4

Modest 0.01% asset base expansion

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.

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