Summary:
Investor sentiment towards emerging markets (EMs) is showing signs of recovery, with capital flows expanding across multiple regions. According to EPFR Global, India-focused equity funds posted their first inflow in five weeks, while diversified EM funds also attracted fresh allocations—often seen as an early indicator of a broader risk-on sentiment.
India Sees Inflows After Five Weeks
- India-focused funds reversed a streak of five consecutive weeks of outflows, marking a positive shift in sentiment.
- The turnaround comes amid resilient macroeconomic indicators and strong equity market performance.
- According to Cameron Brandt, Director of Research at EPFR Global, the trend suggests renewed investor appetite for India, even as global markets remain cautious.
Broader EM Flows Pick Up
- Diversified emerging market funds have continued to attract inflows, a sign that investors may be slowly repositioning for risk.
- Historically, such inflows are seen as a precursor to broader participation across EM equities.
- While China has seen some renewed interest, inflows remain modest and well below historical highs.
Pressure on Ex-China and Developed Market Funds
- In contrast, ex-China EM funds, which gained significant traction last year, are struggling to attract fresh allocations despite fund launches.
- In the US, equity funds remain in inflow territory but lag the strong rebound seen in major indices over the summer.
- Europe briefly paused fund rotation but has now returned to positive inflows. Still, investor caution persists given uncertainty around:
- Fiscal stimulus policies
- Ongoing Ukraine conflict
- Rising bond yields
Disclaimer:
This article is intended solely for educational and informational purposes. The securities or companies mentioned are provided as examples and should not be considered as recommendations. Nothing contained herein constitutes personal financial advice or investment recommendations. Readers are advised to conduct their own research and consult a qualified financial advisor before making any investment decisions.
Investments in securities markets are subject to market risks. Please read all related documents carefully before investing.