India sees $2.3 bn outflows as GEM funds cut allocation to 16.7%

India-focused equity funds are experiencing sustained outflows as global emerging-market (GEM) investors scale back allocations, with China regaining favour among fund managers. According to the latest Elara Global Liquidity Tracker, India funds saw $244 million in outflows this week, up from $183 million the previous week, bringing total redemptions since July 2025 to $2.3 billion.This marks the second wave of foreign withdrawals after a $4.4 billion exodus between October 2024 and March 2025. Within the ongoing phase, large-cap funds have borne the brunt, losing $2 billion, while mid- and small-cap funds have seen comparatively modest withdrawals of about $20 million each. The steepest outflows came from U.S.-based funds at $1 billion, followed by Luxembourg with $765 million and Japan with $365 million.
The prominent GEM managers remain net sellers of India, reallocating capital toward China. India’s weight in GEM portfolios has dropped to 16.7 percent, the lowest since November 2023, compared with a peak of 21 percent in September 2024. In contrast, China’s share has surged to 28.8 percent, signalling a sharp reversal of last year’s allocation trend that had tilted in favour of Indian equities.While India grapples with persistent outflows, other global asset classes continue to attract strong inflows. U.S. equities drew $10.5 billion this week, although momentum has cooled following the Trump administration’s tariff announcement in April 2025. Domestic U.S. funds, however, reported $2.2 billion in redemptions.Meanwhile, safe-haven and commodity assets saw record interest. Precious metals funds received $13.5 billion in inflows—more than double last week’s $6 billion—ranking as the third-largest weekly inflow in history, behind the $16 billion surges on April 16 and September 3, 2025. Commodity funds also posted a fifth consecutive week of strong inflows, the sharpest recovery since 2020. Global high-yield bond funds continued to see steady demand, with net asset values climbing back to October 2021 highs, defying expectations of redemptions despite broader risk-off sentiment.Elara Capital noted that India’s relative underperformance and persistent foreign selling underscore the shifting preference of GEM managers, with capital increasingly chasing opportunities in China and safe-haven assets.

(Business Correspondent)