India has become a beacon in the global market as liquidity continues to pour into large-cap stocks. This exceptional resilience has set India apart, alongside Taiwan and Korea, as global fund managers increasingly allocate capital to select emerging markets, particularly through dedicated funds.
However, the broader picture in emerging markets isn't as rosy. In the past six weeks, emerging markets have seen negative trends, primarily due to redemptions from global emerging markets (GEM) funds, which have witnessed outflows of $7.6 billion.
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Interestingly, India-focused funds have bucked the trend, attracting $3 billion in investments, even as India's midcap funds saw outflows for five consecutive weeks. Additionally, $3.2 billion flowed into Taiwan-focused funds, and $2.2 billion into Korea-dedicated funds, as reported by Elara Capital data.
In the US, the situation is more complex. Flow momentum has reached a standstill within an equilibrium zone since April 2023. A breach of this zone could signify negative flows over a one-year rolling period. Historical data shows that such breaches have led to subdued or negative returns for at least a year. The NAV line for US funds is currently near its long-term support zone, which has only been violated during significant market downturns, Elara Capital said in its latest note.
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While India remains attractive to investors, global markets have displayed varied trends. Energy flows have stayed strong for the second month, whereas IT flows have been slowing due to developments in US tech stocks. Global financial flows have been negative for the past three months, and consumer discretionary flows are weakening.
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