Overall Foreign Interest In India Remains High After Election

When compared to $20.1 billion shares purchased by the foreign investors last year the foreign investors invested a net of $8.8 billion in Indian shares so far this year. "In the last six months sentiment has turned positive for India because of the elections and expectations of a better government," said Niranjan Risbood, director of Fund Research at Morningstar India.  "But overall, India has faced a lot of macro problems and investors are still reluctant to put their money into India-specific funds, so most of the money coming into India is through diversified funds."

The net outflows in May compares with $123.51 million withdrawn from India-only funds in April and is the highest since $814.04 million were redeemed in October 2008. When compared to $33.9 billion last year ends the combined assets under management of offshore India-only funds have shrunk from $55 billion in 2009. At the end of the elections the Aberdeen attributed the selling to some profit-taking after shares hit record highs.

"We've seen some heavy selling towards the end of the month purely on valuations as the market hit all-time highs," James Thom an investment manager in Aberdeen's Asian equities team said. "Investors are taking the opportunities to take some profit on the election event."