India-focused offshore mutual funds and exchange-traded funds recorded net outflows of $4.66 billion in the June quarter even as domestic markets rallied. The Sensex gained 6.9%, midcaps rose 17.4% and smallcaps jumped 29.2%, but foreign investors stayed cautious.
Despite withdrawals, assets of India-focused offshore funds grew 4.2% to $80.2 billion, supported by market gains. Active funds saw net outflows of $4.24 billion, while ETFs recorded smaller outflows of $420 million, showing preference for tactical exposure.
Global factors such as high US Treasury yields, a stronger dollar and geopolitical tensions in West Asia weighed on sentiment. Investors also shifted focus to global themes like artificial intelligence. India-specific concerns included high valuation premiums and slower corporate earnings growth.
Among funds, Franklin FTSE India UCITS ETF attracted inflows of $151 million, while Goldman Sachs India Equity I Inc USD saw outflows of $351 million.
Foreign institutional investors recorded net outflows of $15.1 billion in the quarter, though their holdings rose to $726 billion due to the rally. Their share in India’s equity market fell to 14.48% from 15.15%. Encouragingly, July saw net inflows of $2.1 billion as valuations improved and tensions eased.