India-focused funds face renewed outflows as anti-dollar trades drive global flows: Elara Capital

According to the report, Luxembourg-domiciled funds led the redemptions at $330 million, followed by Japan-based funds with $170 million of outflows.

• Foreign investors withdrew $680M from India equity funds in two weeks.
• Luxembourg and Japan funds led redemptions, US and Ireland funds remained stable
• GEM fund inflows reach record $8B, masking weakness in India-focused funds.

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India-focused equity funds have faced renewed redemption pressure after a brief six-week pause, with foreign investors pulling out $680 million over the past two weeks, according to Elara Capital's Global Liquidity Tracker.

The outflows follow a lull between November 20, 2025 and January 6, 2026, but reaffirm the longer-term trend of structurally weak flows into India-dedicated active funds, Elara said. Of the recent withdrawals, $320 million occurred last week and $360 million this week, with selling pressure concentrated almost entirely in long-only strategies, which saw outflows of $645 million.

According to the report, Luxembourg-domiciled funds led the redemptions at $330 million, followed by Japan-based funds with $170 million of outflows. Redemptions from Japan funds were the largest in 14 weeks, extending a trend of sustained pressure that has been in place since November 2024. On the other hand, US- and Ireland-domiciled funds remained largely stable, with US exposure to India continuing to be ETF-driven and relatively resilient.

Elara noted that the divergence reflects a structural shift in foreign investor behaviour, with India increasingly treated as a top-down allocation rather than a bottom-up conviction trade. While India-focused active funds continue to see persistent redemptions, accelerating inflows into Global Emerging Market (GEM) funds are simultaneously driving tactical, index-led allocations into India, masking the weakness in dedicated long-only participation.

At the global level, the report said the anti-dollar theme remains firmly in play. GEM fund inflows accelerated to a record $8 billion in the latest week, following $6.6 billion the previous week, marking the strongest inflow phase since January–March 2023. Industrial commodity and gold funds recorded eight consecutive weeks of inflows, while silver flows softened modestly over the past four weeks. Commodity equity fund inflows surged to a fresh record of $6.5 billion.

According to Elara, intermittent pauses in India fund redemptions have occurred in the past, but the underlying long-term trend for India-focused active funds remains negative.