Inflows into India-focused funds positive for seventh week, US saw first outflow in six weeks: Elara liquidity report

The report noted that US markets saw $807 million in net outflows last week (week ending May 26), ending a six-week streak of inflows totalling $33 billion.

India continued to see strong foreign capital flows during the week gone by, recording net inflows of $159 million, bouncing back strongly from the $8 million outflow seen a week ago, Elara Capital's Global Liquidity Report has said, marking the seventh consecutive week of positive foreign flows into India-focused funds.

Of the $159 million invested, $102 million flowed into India-specific funds, compared to $158 million the week prior. While the majority of this capital continued to enter through exchange-traded funds (ETFs), what stood out was the highest inflow into India-dedicated midcap funds in 18 months, largely driven by Japanese investors. Since March 2025, India-focused funds have attracted $1.6 billion in net inflows, the report said, 75% of which has gone into ETFs thus effectively reversing nearly $4.4 billion of tariff-induced outflow seen between October 2024 and March 2025.

As per NSDL data (As of April 15), foreign flows have been concentrated towards financial services, with net investment of around Rs 22,000 crore. Other sectors with foreign flows include Capital Goods ( Rs 2,944 crore), telecommunication (Rs 2500 crore) and Oil and Gas (Rs 2400 crore).

These inflows come into India at a time when foreign investment into the US has turned negative for the first time in six weeks. The report said that US markets saw $807 million of net outflows for week ended May 26, snapping a six-week streak of inflows which totalled up to $33 billion. This marks the first redemption since the $10.7 billion outflow in the week ending April 9, triggered by market anxiety over Trump’s trade tariffs.

While the scale of this week's US outflows remains modest, the directional shift is notable. The report said that the flows in coming weeks will be crucial to decide whether this is a temporary pause or the beginning of a broader trend reversal. Domestic mutual fund outflows in the US have already been evident since late March, aligning with tariff announcements and increasing investor caution.

Across emerging markets, the report found investor sentiment broadly positive for the sixth consecutive week. China attracted the highest inflows at $931 million, followed by Brazil ($250 million), Mexico ($194 million), and India ($159 million).

Global investors are also repositioning into commodities and riskier debt, and the report said gold funds are seeing a strong comeback, with $4 billion in inflows this week after four consecutive weeks of outflows (totalling $14 billion). The recovery follows $71 billion in inflows from January to April 2025, before May clocked net redemptions as tariff discussions get underway. Junk bond funds too continue to be in favour, registering a fifth straight week of inflows at $2 billion this week, following $2.3 billion worth of buying last week.