India-focused mid cap funds see inflows amid outflows from EMs: Elara Capital

According to the report, while outflows from developed markets have also slowed down, funds from countries like China, Taiwan, Japan, Brazil, and Mexico have continued to flow into the US

Over the past two weeks, outflows have continued from nearly all EMs, with exceptions being India, Singapore, and Argentina, according to Elara Capital's Global Liquidity Tracker.

The report notes that Dedicated India funds saw an inflow of $128 million in the week ending December 5, reversing a previous week's redemption of $196 million. The recent pressure on Indian flows since October 2024, according to the report, has largely been attributed to allocation-based funds. In total, Indian funds saw redemptions of $3 billion since October 2024, with $870 million coming from dedicated funds.

The latest set of inflows into India focussed funds were specifically seen in mid cap funds, according to the report. After six months of sustained outflows, Indian midcap funds witnessed an inflow of $34 million this week ( week ending January 5).

"This will be an important trend to watch since the change in direction is after a longtime," the report noted. Additionally, the net asset value (NAV) of India's dedicated midcap funds is currently holding at a strong support level. "Despite the correction in markets, trends have not broken there. In the past, any break lower has signified weaker trends for some time. However, as of now, trends are holding strong," the report added.

Flows into the US also slowing down

According to the report while outflows from developed markets have also slowed down, funds from countries like China, Taiwan, Japan, Brazil, and Mexico have continued to flow into the US.

Pace of foreign inflows into the US has sharply slowed. After a surge of $19 billion in the week ending November 13th following the 2024 US elections and Donald Trump victory, inflows have dropped to just $4.5 billion in the week ending January 5.  Additionally, the report notes that global risk appetite is slowly fading primarily driven by slower redemptions from high-yield bond funds that began last month ( December 2023).