Foreign inflows speed up as India gains weight

The Indian markets have absorbed more foreign inflows as compared to other emerging markets (EMs) in the initial three months of 2017. Thus, the domestic stocks have captivated over $6 billion of inflows this year, as against South Korea and Taiwan, who gained $5.5 billion and $4.7 billion respectively.

It can be noticed that, the greater volume of the flows is because of Exchange-traded funds (ETFs) and not due to active investments. Therefore, country’s weight has shot up in the latest months in other emerging markets and Asia excluding Japan, as a result of which the country has witnessed increased foreign inflows.

However, if the comparison is done on a 12-month basis, Taiwan and Korea have gained more inflows than India, as last year many of the funds had lowered their weight on Indian markets.

As per some reports, India’s allotment in Asia (excluding Japan) and global equity market funds noticed an upward trend in February. The increased inflows have too seen Indian markets come out as the best-performing major markets globally.

Also, the lower-than-expected demonetisation effect on activity and earnings, good signs from the global reflation trade and recent suitable state elections have increased the risk appetite among investors.