Nearly 60% of foreign inflows into India-focused funds withdrawn since 2024 peak: Report
New Delhi, July 11
Nearly 60 per cent of the foreign money that flowed into India-focused equity funds during the 2023-24 investment rally has now been withdrawn as global investors continue to shift capital towards artificial intelligence-linked opportunities, according to an Elara Capital research report.
The report said India-focused funds attracted nearly USD 20 billion between March 2023 and October 2024, but almost USD 12 billion of those inflows have since been redeemed.
"Almost 60% of inflows that India focused funds saw in 2023-24 period has been pulled out. Redemptions have accelerated since Jan'26 to fund the AI trade & momentum continues to remain weak," the report said.
According to the report, investors have withdrawn USD 9 billion from India-focused funds so far in calendar year 2026, including USD 7 billion from long-only funds and USD 2 billion from exchange-traded funds (ETFs).
The report said Luxembourg accounted for the largest share of redemptions at USD 3.5 billion, followed by the United States at USD 2.4 billion and Japan at USD 2.1 billion, while Ireland remained the only major fund domicile to largely avoid the current round of selling.
Elara Capital said the shift in investor preference is being driven by the global AI investment theme, although buying has become more selective than during the initial rally.
"The broader AI ecosystem trade continues to lose momentum, although investors remain selective within the theme," the report said.
It added that global emerging market (GEM) funds, which had increasingly become a proxy for the AI value-chain trade, continue to witness outflows.
"The AI trade is becoming concentrated in a few direct beneficiaries rather than the broader ecosystem," the report noted, adding that foreign investors have resumed buying dedicated South Korea and Taiwan funds following the April-May correction, albeit at a much slower pace than during the peak of the AI rally.
The report also highlighted improving investor sentiment towards some other asset classes.
Gold funds recorded a USD 317 million inflow during the week, marking the first positive reading after nearly USD 14 billion of outflows since April.
"Gold funds recorded a modest inflow of $317mn, the first positive reading after $14bn outflows since Apr, while pressure on Silver funds has also eased over recent weeks," the report said.
Meanwhile, US equities attracted USD 27 billion in fresh inflows, reversing the withdrawals seen over the previous two weeks, while Europe registered its first weekly inflow in nearly three months, the report added.
— ANI
Reader Comments
JFYI, this is a natural correction after such a massive bull run. We saw USD 20 billion come in, and now 60% is going out - that's still USD 8 billion staying. And with India's growth story, I'm sure more will flow back once the AI hype stabilizes.
"Investors shifting to AI opportunities" - so basically they sold India to buy Nvidia and other US tech stocks. Classic FOMO. Meanwhile, our IT services companies are also investing heavily in AI. India's digital infrastructure and young workforce are huge advantages. Patience is key here.
As someone who works in global macro, this is typical rebalancing. India still has strong fundamentals - manufacturing push, digital economy, demographics. The AI theme is real but it's also hyped. A helpful reminder for Indian investors to focus on quality stocks and long-term horizon rather than daily FII flows.
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