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Emerging markets are always the first to witness withdrawals and the last to receive inflows.

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Fundamentals and data points are the cause that results in funds flowing in and out of markets. While rising bond yields and the growing tension in the Middle East have caused anxious moments, these actions are visible in the withdrawals of funds.

Foreign portfolio investors (FPIs) dumped Indian stocks worth over Rs 25,000 crore in October, the second highest in 2023. US Treasury yield touching the 5 percent mark triggered the panic button, which led to a fresh bout of selling. Emerging markets are always the first to witness withdrawals and the last to receive inflows.

In the current environment too, emerging market funds are seeing regular withdrawals.

According to LSEG (London Stock Exchange Group), investors pulled out a net $7.46 billion from global equity funds during the week to October 25, a streak of six consecutive weeks. Even developed markets saw huge withdrawals.

European equity funds saw $7.39 billion of investment leave their shores, the biggest amount since September 28, 2022. The US markets saw an outflow of $2.69 billion.

Funds are flowing out of equities and into bond funds. Government bond funds received $5.02 billion, the biggest weekly inflow in seven months.

After a 21-week-long selling streak, precious metal funds saw inflows of $411 million, indicating an increasing risk-averse environment.

Data from 28,654 emerging market funds showed investors withdrew $2.55 billion from EM equity funds, extending an 11-week streak. EM bond funds also remained out of favour for the 13th successive week with $875 million in net disposals.

However, Indian markets have a cushion of domestic investment with a strong SIP inflow every week, this could prevent it from being among the worst-performing emerging markets. Incidentally, among the top-performing markets in the world in October 2023 was Karachi, with a gain of 12.25 per cent, which sums up the madness on the Street.

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Shishir AsthanaMoneycontrol Pro