New Delhi:  Investors poured money into equity funds focused on India and China in the week ended July 21 as concern about economic growth spurred withdrawals from developed-market stocks, EPFR Global said.

India funds received a net $187 million (Dh 686.898 million), the most in 51 weeks, while China money managers took in $138 million, EPFR said. Some $428 million flowed out of Japan equity funds while developed Europe had withdrawals for the eighth week in 10.

"Global equity markets continued to ensure a bumpy ride in mid-July," EPFR said in an emailed statement. "Investors responded by gravitating towards fixed income funds, although enough money found its way into emerging market equity funds to suggest that yield remains a real concern."

The MSCI Emerging Markets Index rose for a fourth day, adding 0.8 per cent to 980.8 as of 11:06 am in Singapore, set for its highest close since May 4. The gauge has gained 6.9 per cent this month, the most since March.

Funds investing in stocks in Asia excluding Japan got more than $800 million for the second week in a row, and global emerging-market equity funds received $796 million. Latin America equity funds posted back-to-back weeks of inflows for the first time since early April, it said.

Solid week

EPFR Global-tracked bond funds "enjoyed another solid week as yield hungry but skittish investors steered significant sums into all four of the major fund groups," it said.

Investors put $2.37 billion into US bond funds, pushing the year-to-date flows into global bond funds to more than $40 billion, EPFR said.

"Mixed second quarter earnings numbers, a less than ringing endorsement of the US economy from Federal Reserve Chairman Ben Bernanke and fresh setbacks for Europe's sovereign debt story clouded the outlook for the second half of the year," EPFR said.

Rupee rise linked to interest rate speculation

India's rupee rose for a third day on speculation the Central Bank will raise interest rates next week for a fourth time this year, making local assets more attractive to investors seeking higher yields.

The currency pared the week's loss after exchange data showed overseas holdings of the nation's stocks and bonds touched all-time highs of $81.6 billion (Dh299.737billion) and $15.4 billion in the past week.

The Reserve Bank of India will increase its benchmark reverse repurchase rate by a quarter percentage point to 4.25 per cent on July 27, according to all 18 economists surveyed by Bloomberg News.

"The rupee at the current level looks very cheap and we are advising our clients to be long on the currency," said Ramit Bhasin, head of markets in India at Royal Bank of Scotland Group Plc. "With these rate hikes, and the carry differential that is picking up, the rupee will get stronger."

The currency appreciated 0.2 per cent to 47.02 per dollar as of 10:15 am in Mumbai, paring this week's decline to 0.5 per cent, according to data compiled by Bloomberg. It touched 47.385 on July 20, the weakest level since June 7.

Offshore forward contracts indicated the rupee will trade at 47.63 to the dollar in three months, compared with expectations for a rate of 47.72 yesterday and 47.35 at the end of last week. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.