Foreign investors withdraw $244M, triggering second wave of outflows
What's the story
Foreign investors have pulled out a staggering $244 million from India-focused funds this week, according to Elara Capital. The report highlights that this is part of the second major redemption wave since July, which has already seen an outflow of $2.3 billion. This is the biggest withdrawal since the $4.4 billion rout between October 2023 and March 2024.
Fund impact
Large-cap funds hardest hit
The latest selloff has hit large-cap funds the hardest, with $2 billion in withdrawals during this phase. In contrast, mid- and small-cap funds have largely escaped the carnage with redemptions of just about $20 million each. The report also notes that US-based funds led these withdrawals ($1 billion), followed by Luxembourg ($765 million) and Japan ($365 million).
Market shift
Shift in global emerging market portfolios
The trend of outflows is driven by a major shift in global emerging market (GEM) portfolios. India's allocation in GEM funds has dropped to 16.7%, its lowest since November 2023, from a peak of 21% in September 2024. Meanwhile, China's share has jumped to 28.8%, indicating a strong pivot by active managers toward the country.
Global trends
US equity funds see inflows amid outflows elsewhere
Despite India's sustained outflows, US equity funds raked in $10.5 billion this week. However, the inflow momentum has slowed since the Trump administration's tariff announcement in April. Domestic US funds saw redemptions of $2.2 billion during this period. Precious Metal funds attracted a record $13.5 billion, while commodity funds extended their winning streak to five weeks—the longest since 2020. High-yield or junk bonds continued to surprise with steady inflows, and net asset values climbed back to October 2021 highs.