India sees highest foreign inflows in eight months as global risk appetite improves: Elara Capital

Commodity-linked funds also recorded higher allocations. Physical industrial commodity funds attracted $4 billion, while precious metal funds saw $8.2 billion of inflows, both at nine-week highs. Commodity equity funds received $1.8 billion, the strongest in ten weeks.

India recorded an improvement in foreign portfolio flows, with inflows rising to an eight-month high of $650 million in the latest week, according to Elara Capital's latest Global Liquidity Tracker. The pickup comes amid a broader rise in global risk appetite across equities, emerging markets and commodities.

Globally, US equity funds attracted $79 billion, the highest weekly inflow in a year, driven largely by investments into S&P 500-linked exchange-traded funds. At the same time, money market funds saw $44 billion in redemptions, the largest in eight months, indicating a shift towards risk assets.

Elara noted that inflows of this size into US equities have been relatively infrequent in recent years and have, in some past instances, coincided with market peaks. The brokerage said that if markets fail to build on recent gains, the likelihood of a near-term correction typically increases.

Within emerging markets, global EM fund inflows rose for a sixth consecutive week to $3.2 billion, a three-month high. China saw inflows rebound to a nine-week high of $10.3 billion, while Brazil received $685 million, the highest in four weeks. Taiwan and South Korea continued to attract steady inflows alongside India.

Elara added that EM inflows over the past few months have been broadly distributed, with a growing number of countries seeing positive flow momentum simultaneously. Historically, periods of highly correlated EM inflows have been followed by phases of market consolidation.

Commodity-linked funds also recorded higher allocations. Physical industrial commodity funds attracted $4 billion, while precious metal funds saw $8.2 billion of inflows, both at nine-week highs. Commodity equity funds received $1.8 billion, the strongest in ten weeks.