India sees $2.3 bn outflows as GEM funds reduce allocation to 16.7%, China rises to 28.8%: Elara Capital

The largest outflows originated from U.S.-based funds, which pulled out $1 billion, followed by Luxembourg with $765 million and Japan with $365 million

India-focused funds saw $244 million in outflows this week, accelerating from $183 million a week earlier, according to the latest Elara Global Liquidity Tracker. Since the start of the current redemption wave in July 2025, foreign investors have withdrawn a total of $2.3 billion from India funds. This follows a $4.4 billion exodus during the first wave of selling between October 2024 and March 2025.

Within the current phase, large-cap funds have suffered $2 billion in redemptions, while mid- and small-cap funds have faced only limited withdrawals of about $20 million each. The largest outflows originated from U.S.-based funds, which pulled out $1 billion, followed by Luxembourg with $765 million and Japan with $365 million.

Active GEM managers remain net sellers of India, redirecting flows to China. India’s share in GEM funds has slumped to 16.7 percent, its lowest since November 2023, down from a peak of 21 percent in September 2024. By contrast, China’s allocation has surged to 28.8 percent, marking a decisive reversal of the past year’s trend in favour of Indian markets.

While India faces steady outflows, other asset classes are attracting strong inflows. US equities recorded $10.5 billion in foreign inflows this week, though momentum has slowed since the Trump administration’s April 2025 tariff announcement. Domestic US funds, however, saw $2.2 billion in redemptions.

Precious metals funds drew $13.5 billion of inflows, more than double last week’s $6 billion, ranking as the third-largest weekly inflow in history behind the $16 billion spikes on April 16, 2025, and September 3, 2025. Commodity funds extended a fifth consecutive week of strong inflows, the strongest recovery in flows since 2020. Global high-yield, or junk, bond funds continue to attract steady inflows despite typically risk-off global sentiment, with net asset values climbing back to October 2021 highs and defying expectations of redemptions.

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