New Delhi [India], July 11 (ANI): Nearly 60% of the foreign capital that flowed into India-focused equity funds during the 2023-24 investment rally has been withdrawn as global investors continue shifting money toward artificial intelligence (AI)-related opportunities, according to a research report by Elara Capital.
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 the 2023-24 period has been pulled out. Redemptions have accelerated since Jan. 2026 to fund the AI trade, and momentum continues to remain weak,” the report said.
According to Elara Capital, investors have withdrawn USD 9 billion from India-focused funds so far in 2026, including USD 7 billion from long-only funds and USD 2 billion from exchange-traded funds (ETFs).
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. Ireland remained the only major fund domicile to largely avoid the current wave of selling.
Elara Capital said the shift in investor preference has been 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.
The report added that global emerging market (GEM) funds, which had increasingly become a proxy for the AI value-chain trade, continue to experience 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 market correction, though at a much slower pace than during the peak of the AI rally.
The report also highlighted improving investor sentiment toward other asset classes.
Gold funds recorded inflows of USD 317 million during the week, the first positive reading after nearly USD 14 billion in outflows since April.
“Gold funds recorded a modest inflow of USD 317 million, the first positive reading after USD 14 billion in outflows since April, while pressure on silver funds has also eased in recent weeks,” the report said.
Meanwhile, US equities attracted USD 27 billion in fresh inflows, reversing the outflows recorded over the previous two weeks, while Europe posted its first weekly inflow in nearly three months, the report added. (ANI)
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