India ETFs outperform long-only strategies for the first time since 2023: Elara Capital

Elara highlighted that such ETF-led strength has historically occurred during phases of narrow market breadth and large-cap outperformance, previously seen between 2010–2014 and 2018–2021.

India-focused equity funds remained under pressure for the ninth consecutive week, even as exchange-traded funds (ETFs) staged a reversal. According to Elara Capital’s Global Liquidity Tracker, India funds saw net outflows of $106 million, down from $162 million the previous week and well below the recent peak of $382 million in mid-October.

The weakness continued to be concentrated in long-only active funds, which lost $148 million during the week. In contrast, India ETFs attracted $42 million in inflows, marking the first time since January 2023 that passive ETF flows have outperformed active long-only strategies. All incremental redemptions since September originated from Luxembourg-domiciled funds, the report noted.

Elara highlighted that such ETF-led strength has historically occurred during phases of narrow market breadth and large-cap outperformance, previously seen between 2010–2014 and 2018–2021.

Global equity markets on the other hand saw a resurgence as fund flows to global equities rose to a two-month high as investors bought into recent corrections. China recorded $9.6 billion in inflows, reversing two weeks of cumulative redemptions, with 22% of the money coming from foreign-domiciled vehicles. Meanwhile, US equity funds drew $20 billion, a seven-week high and double their average weekly intake since September.

In commodities, redemptions from Physical Commodity Funds fell to $2.2 billion from $7.3 billion the prior week, while outflows from Commodity Equity Funds dropped 90% to $224 million. Precious Metal Fund outflows also moderated significantly to $1.2 billion, after a steep $19 billion exodus the previous week.