Foreign Investors Pull $8.5 Billion From India Funds as Global Money Shifts to AI Markets

India-focused equity funds have seen an accelerated pace of foreign redemptions in 2026, with cumulative outflows reaching $8.5 billion as investors move money toward U.S. technology stocks and artificial intelligence-related opportunities, according to Elara Securities.

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The brokerage said nearly 55% of the capital that flowed into India-focused funds between March 2023 and October 2024 has now been withdrawn. A large share of these redemptions has come from funds based in Luxembourg and Japan, reflecting a broader change in global portfolio allocations.

Global Capital Moves Back to U.S. Markets

In its latest Global Liquidity Tracker, Elara Securities said India has increasingly become a source of funds for investors seeking exposure to the ongoing AI-driven rally. The report noted that withdrawals from India-dedicated funds have picked up since the beginning of the year as money shifted to markets such as Taiwan and South Korea, which are closely linked to the global semiconductor and AI supply chain.

The shift has coincided with strong flows into U.S. equities. According to the report, U.S. stocks attracted a record $120 billion in the latest week, with exchange-traded funds accounting for a significant portion of those investments.

Nearly $50 billion flowed into three ETFs tracking the S&P 500. U.S. mid-cap ETFs received a record $20 billion, while small-cap funds recorded inflows of $12.3 billion, their highest since June 2007. Technology-focused funds attracted a record $19.2 billion.

Elara said investors are increasingly concentrating on U.S. technology companies as expectations of a prolonged higher interest-rate environment and enthusiasm around artificial intelligence continue to support the sector. The brokerage added that the AI investment theme has become more focused on U.S. innovators, while capital flows into peripheral AI markets have moderated.

Emerging Markets Continue to Face Pressure

Emerging market funds continued to witness outflows, although the pace slowed to $570 million from nearly $3 billion in each of the previous two weeks.

Elara noted that South Korea and Taiwan, which together account for around 52% of the benchmark emerging market index, returned to positive territory after six weeks of weakness. Foreign inflows into South Korea stood at $1.3 billion, while Taiwan received $600 million.

India and China remained under pressure, recording outflows of $440 million and $1.7 billion, respectively. Brazil and Mexico also continued to witness redemptions.

Meanwhile, investors reduced exposure to precious metals funds. According to the report, outflows from the segment rose to a 12-week high of $3 billion, taking cumulative withdrawals since March to $18 billion.

The latest data highlights how global liquidity continues to favour AI-linked assets and U.S. equities, while several emerging markets, including India, face a more challenging environment for foreign fund flows.