In just a week, China-dedicated funds have seen staggering inflows worth over $13 billion while India-dedicated funds received just $107 million, less than 1 percent of the China inflows, pointed out Cameron Brandt, Director of Research at EPFR Global.
"Even though flows into dedicated India funds this week were less than 1 percent of the flows we saw into dedicated China funds, they were still positive, which I would take as a very good sign," Brandt said.
In an interview with CNBC-TV18, Brandt described the sharp shift in flows to China as "spectacular." He said that China's equity market has been the primary recipient of new funds in recent weeks, especially in the past week when China was "the only show in town" in terms of flow.
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Brandt said that India-dedicated funds have enjoyed 70 to 75 consecutive weeks of positive inflows. "The money is still coming, even when a very alluring alternative is on offer," he said.
There is growing curiosity about how long this "sell India, buy China" trend will last. Brandt believes that Chinese policymakers' focus on boosting their equity markets means that appetite for China could persist. "Chinese policymakers have made it very clear that they are paying attention to their equity market and they want to see it on the rise," Brandt explained.
"It isn't as much of a straightforward India-China rotation as it might first appear," Brandt added, indicating that the rotation to China hasn't come solely at India's expense. Much of the capital has come from European liquidity funds, as investors look to reposition their portfolios amid changing market dynamics.
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To put the numbers in perspective, the average weekly inflow into India-dedicated funds last year ranged between $400 million and $500 million. This week's $107 million figure marks a noticeable decline but still reflects ongoing interest in Indian equities. Brandt noted that broader global emerging market (GEM) funds, which include India allocations, saw inflows of $700 million this week—an improvement from the outflows witnessed earlier this year. "Within those GEM funds, India's allocation, while still not as high as China's, is at a record high," he said.
Brandt said that while China may continue to attract significant inflows, India is likely to maintain its appeal. "India remains in quite a healthy position," he added.
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