India continued to gain prominence among foreign portfolio investors (FPIs) in April, with global emerging market (EM) and Asia ex-Japan funds increasing their allocations to Indian equities. However, this rise in allocation came even as the country witnessed a net outflow of foreign investment during the month. According to Kotak Institutional Research, this trend reflects India’s growing weight in foreign fund strategies despite broader market volatility and profit booking.
Rising Allocations from EM and Asia ex-Japan Funds
As per the data, global emerging market funds raised their India allocation to 17.5% in April, up from 16.7% in March. Similarly, Asia ex-Japan actively managed funds increased their India exposure to 19.2% from 18% a month earlier. The overall allocation of global emerging market mandates to India also climbed to 19.5% in April, compared to 18.7% in March.
These two fund categories—Asia ex-Japan and global EM—represent the largest foreign institutional investor (FII) segments for Indian equities. Combined, FPIs hold more than $800 billion worth of investments in Indian stock markets, making India a critical component of their portfolios.
Mixed Flow Trends Across Emerging Markets
Despite the increased allocation percentages, India saw net outflows of $453 million in April, joining other major Asian economies in the red. Taiwan recorded outflows of $828 million, while South Korea saw $710 million withdrawn. In contrast, China witnessed the most significant capital flight, with emerging market funds pulling out $8.7 billion, likely driven by concerns over its economic recovery and regulatory uncertainties.
Brazil stood out as an exception, attracting $409 million in inflows during the same period. The mixed trend indicates a cautious approach by global investors toward emerging markets, selectively favouring economies based on growth visibility and geopolitical stability.
The rise in India’s share of fund allocations, even amid capital outflows, signals confidence in the country’s long-term growth narrative. It also highlights a rebalancing strategy among fund managers who are recalibrating exposures based on macroeconomic resilience and earnings outlook, rather than just near-term market flows.
