India fund outflows flag more pain as further losses ahead

Local investors are exiting Indian debt funds at the fastest pace since September, a sign of more losses ahead for bonds that are the worst performers among the largest emerging markets this quarter.

Fixed-income funds saw an outflow of 25 billion rupees ($391 million) in April, a third straight month of withdrawals, data from Association of Mutual Funds in India show. Investors left just in time to avoid a global bond market rout that saw the benchmark 10-year rupee sovereign yields surge 19 basis points in the last two weeks.

Birla Sun Life Asset Management Co and Tata Asset Management say returns could worsen further as a rebound in oil prices and a drop in the rupee limit the scope for the Reserve Bank of India to cut interest rates. Investors in Indian government notes lost 0.6 percent this quarter, compared with returns of 7.1 percent in Russia, 4 percent in Brazil and 1.4 percent in China securities, JPMorgan Chase & Co indexes show.