In 2023, India became a significant recipient of global liquidity, with around US$15 billion flowing into Indian equities from global mutual funds, as reported by Elara Capital. The report highlighted the substantial foreign inflows, positioning India alongside the United States and Japan as primary beneficiaries, while Europe witnessed outflows. Data indicated that the US, India, Japan, and Hong Kong secured the top spots for the largest recipients of global funds in 2023, with China, Brazil, and Mexico following.
Until September 2023, mid-cap funds in India experienced robust inflows, constituting nearly 40% of the total funds. However, the subsequent three months saw a shift in focus towards large-cap funds. This trend of substantial inflows into India-dedicated funds continued into January 2024, with weekly inflows totaling US$270 million, building on previous weeks’ figures of US$450 million and US$524 million.
The report emphasized that most of these inflows targeted large-cap funds, with a significant portion originating from US-domiciled funds. In contrast, China witnessed weakened foreign flows in 2023, leading to substantial redemptions in the second half of the year. A considerable portion of this redirected liquidity found its way into the Indian market, contributing to a 21% increase in India’s Net Asset Value (NAV) in 2023, while China saw a decline of 16%, according to Mr. Sunil Jain of Elara Capital.
