India-focused equity funds have lost 60% foreign investment since 2024
What's the story
Foreign investors have pulled out nearly 60% of their investments from India-focused equity funds, according to a report by Elara Capital. The capital shift is mainly due to the global artificial intelligence (AI) investment trend. Between March 2023 and October 2024, these funds attracted nearly $20 billion. However, nearly $12 billion of those inflows have already been redeemed.
Withdrawal details
Major redemptions from Luxembourg, US, and Japan
In the calendar year 2026 alone, investors have withdrawn a whopping $9 billion from India-focused funds. This includes $7 billion from long-only funds and another $2 billion from exchange-traded funds (ETFs). Luxembourg led the redemption wave with a massive share of $3.5 billion, followed by the United States at $2.4 billion and Japan at $2.1 billion.
Unaffected domicile
Ireland largely escaped the current selling wave
Notably, Ireland is the only major fund domicile that has escaped the current selling wave. Elara Capital's report attributes this shift in investor preference to the global AI investment theme. It notes that buying has become more selective as compared to the initial rally period.
Outflow trends
GEM funds continue to see outflows
Global emerging market (GEM) funds, which were increasingly seen as a proxy for the AI value-chain trade, continue to see outflows. The report also highlights that foreign investors have started buying dedicated South Korea and Taiwan funds again after the April-May correction. However, this is at a much slower pace than during the peak of the AI rally.