News Global India-focused funds face $680 million outflows as anti-dollar trades drive global flowsIndia-focused funds face $680 million outflows as anti-dollar trades drive global flows
Foreign investors withdrew $680 million from India-focused equity funds over two weeks, with Luxembourg funds leading at $330 million and Japan funds contributing $170 million in outflows. Long-only strategies bore the brunt with $645 million in redemptions, while US and Ireland funds remained stable. Despite India fund struggles, Global Emerging Market funds achieved record $8 billion inflows, reflecting a shift toward top-down allocation strategies rather than bottom-up conviction trades in India.
*this image is generated using AI for illustrative purposes only.
India-focused equity funds have encountered renewed redemption pressure after a brief respite, with foreign investors pulling out $680 million over the past two weeks, according to Elara Capital's Global Liquidity Tracker. The outflows follow a lull between November 20, 2025 and January 6, 2026, but reaffirm the longer-term trend of structurally weak flows into India-dedicated active funds.
Recent Outflow Breakdown
The withdrawal pattern showed $320 million in outflows last week, followed by $360 million this week. Selling pressure concentrated almost entirely in long-only strategies, which experienced outflows of $645 million during this period.
| Fund Domicile | Outflows | Notable Trends |
|---|---|---|
| Luxembourg | $330 million | Led overall redemptions |
| Japan | $170 million | Largest outflows in 14 weeks |
| US | Stable | ETF-driven exposure remains resilient |
| Ireland | Stable | No significant redemption pressure |
Geographic Distribution of Redemptions
Luxembourg-domiciled funds led the redemptions at $330 million, followed by Japan-based funds with $170 million of outflows. The redemptions from Japan funds marked the largest withdrawals in 14 weeks, extending a sustained pressure trend in place since November 2024.
Conversely, US- and Ireland-domiciled funds remained largely stable. US exposure to India continues to be ETF-driven and relatively resilient, highlighting a divergence in investor behavior across different markets.
Structural Shift in Investment Approach
Elara noted that this divergence reflects a structural shift in foreign investor behavior, with India increasingly treated as a top-down allocation rather than a bottom-up conviction trade. While India-focused active funds continue experiencing persistent redemptions, accelerating inflows into Global Emerging Market funds are simultaneously driving tactical, index-led allocations into India, masking the weakness in dedicated long-only participation.
Global Market Context
At the global level, the anti-dollar theme remains firmly in play, creating contrasting flows across different investment vehicles.
| Investment Category | Recent Performance |
|---|---|
| GEM Fund Inflows | Record $8 billion (latest week) |
| Previous Week GEM Inflows | $6.60 billion |
| Industrial Commodity Funds | Eight consecutive weeks of inflows |
| Gold Funds | Eight consecutive weeks of inflows |
| Commodity Equity Funds | Record $6.50 billion inflows |
GEM fund inflows accelerated to a record $8 billion in the latest week, following $6.60 billion the previous week, marking the strongest inflow phase since January–March 2023. Industrial commodity and gold funds recorded eight consecutive weeks of inflows, while silver flows softened modestly over the past four weeks.
Long-term Outlook
According to Elara, intermittent pauses in India fund redemptions have occurred in the past, but the underlying long-term trend for India-focused active funds remains negative. The current outflow pattern suggests continued structural challenges for dedicated India equity funds, even as broader emerging market investments attract significant capital.
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