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Pension, sovereign funds bring in more ‘sticky’ money

The share of long-term ‘sticky’ foreign funds including global pension funds, sovereign wealth funds (SWF), central banks and government agencies in Indian equities has been on the rise despite wobbly economic parameters in 2019. The assets under management (AUM) of these funds rose by 20.1 per cent year on year to Rs 6.5 lakh crore ($91.6 billion) while the total AUM of the foreign portfolio investors (FPIs) increased by 11.5 per cent in 2019, according to data from NSDL. The share of the long-term funds in the total AUM of FPIs rose to 21.4 per cent in November 2019, a gain of 333 basis points in the past two years. FPIs’ total AUM at $428 billion accounts for nearly one-fifth of the total market capitalisation of Indian equities.

The AUM of the global central banks reported the highest growth followed by government agencies and SWF. The AUM of central banks in Indian equities rose by 50 per cent to Rs 74,772 crore since the beginning of year. Their share increased to 2.5 per cent in November 2019 from 1.8 per cent in December 2018.

The rising share of the so called sticky funds will help to some extent in alleviating fears of the flight of “hot money” of FPIs out of the country in times of a slowdown. According to a study by Kotak Institutional Equities, India-focused funds, exchange traded funds and global emerging funds have reported outflows in 2019. India-focused foreign funds, which account for 41 per cent of the total FPI AUM, sold $5 billion of Indian equities in the first ten months of 2019. Foreign funds have invested $13.8 billion in Indian equities in 2019, the highest inflow in the last five years and the largest among the emerging markets, barring China.

Source: Economic Times