We are pleased to present the March 2012 quarter-end edition of the “Morningstar Offshore India Fund Spy”. The report gives an insight into performance and flow / asset trends of Offshore India Funds captured in the Morningstar Global Database. An offshore India fund would be one that is not domiciled in India, but invests primarily into the Indian markets. We have also included the fund flows of the large funds with partial allocation in India, into the report. Please refer to the report for more details on methodology.
Please click here to download the full report
Key Takeaways:
A) Asset Flows and Assets of India-Focused Offshore Funds
- European investors returned back to emerging market funds in the first quarter of 2012, after withdrawing money from these funds in the last two quarters of 2011. As investors embraced risk globally, India-focused offshore funds in Europe also registered net inflows of €376 million during the quarter ended March 2012—making it the first quarterly net inflow in over a year.
- The total net assets of India-focused offshore funds available for sale (AFS) in Europe rose by 19% during the first quarter of 2012, helped by a rebound in markets and decent inflows in the new year. These funds had registered a sharp 40% drop in assets in 2011.
- In the first quarter of 2012, HSBC GIF Indian Equity registered the biggest inflow--€162 million--making it the first inflow, after seven consecutive quarters of outflows for this fund. The performance of this fund, picked up significantly in 2012. The fund had recorded huge outflows of €935 million in the year 2011, on the back of poor performance.
- Japanese investors also embraced risk and returned back to emerging market funds during the first quarter of 2012, after drawing out money from these funds in 2011. India-focused offshore equity funds domiciled in Japan benefited from this and registered a net inflow of ¥ 5.5 billion during the first quarter of 2012, after recording three consecutive quarters of net outflows.
- The total net assets of offshore India funds in Japan rose by 26% during the quarter--to ¥ 487 billion. This was after a sharp decline in 2011, which saw assets fall by a hefty 48%, to their lowest levels in over 6 years.
B)
Performance of India-Focused Offshore Funds
- Global markets rebounded in the first quarter of 2012, after a disappointing 2011. Indian bourses also followed suit with the benchmark SENSEX index gaining 12.61% (in INR terms) during the quarter, while the MSCI India USD Index surged almost 20% (in USD terms), helped by a rising rupee.
- Offshore India funds delivered their best quarterly performance in almost 3 years—of an average 18.23% (in USD terms), helped by the rebound in markets, and the appreciating rupee.
- Funds with higher exposure to interest-rate sensitive sectors like banking, auto, industrials and infrastructure outperformed during the quarter, as the central bank stopped it monetary tightening, and switched back to an expansionary policy.
- Besides that, funds having higher exposure to mid and small cap stocks also fared better, with these stocks outperforming their large cap peers by a significant margin during the quarter. The top three performing offshore India funds during the quarter were mid/small-cap oriented funds.
- After a disappointing performance in 2011, which led to large outflows from the fund, HSBC GIF Indian Equity A Acc, managed to regain some of its lost glory in the first quarter of this year--delivering a return of 28.95%, and ranking in at the fifth spot.