India-Focused Funds See $9 Billion Outflows as Global Investors Shift Toward U.S. Equities

India-focused investment funds have witnessed sustained foreign outflows this year as global investors increased allocations to U.S. equities, reflecting changing portfolio preferences amid a more selective approach to artificial intelligence (AI)-linked investments, according to an Elara Capital report.

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The report said India-focused funds have recorded net outflows of $9 billion since the start of calendar year 2026. During the latest week, U.S. equity funds attracted fresh inflows of $27 billion, more than reversing the $25 billion withdrawn over the previous two weeks. The trend points to stronger investor interest in U.S. markets even as allocations to emerging markets remain under pressure.

India-Focused Funds Continue to Face Redemptions

As per Elara Capital, there were outflows amounting to $7 billion by long-only India focused funds, and ETFs had outflows amounting to $2 billion in 2026.

This report indicated that the recent selling took place after a period when India focused long-only funds received inflows to the tune of $20 billion from March 2023 to October 2024. Of that amount, almost $12 billion has now been redeemed, including $7 billion during the current calendar year.

Among fund domiciles, Luxembourg registered the highest redemptions at $3.5 billion, followed by the U.S. with $2.4 billion and Japan with $2.1 billion. Ireland was the only major domicile that largely avoided significant withdrawals during the period.

AI Investment Theme Becomes More Focused

Elara Capital said the global AI investment theme is becoming increasingly concentrated around a smaller group of direct beneficiaries instead of the broader technology ecosystem.

The report added that Global Emerging Market (GEM) funds, which had previously benefited from AI-related investments, continue to witness outflows. At the same time, overseas investors have resumed buying South Korea and Taiwan-focused funds following the correction seen during April and May, although inflows remain below the levels recorded during the peak of the AI-driven rally.

Elara Capital said the AI investment cycle is becoming more selective, with investors narrowing their focus to companies viewed as direct beneficiaries.

Commodity-Linked Funds Show Mixed Trends

The report highlighted that Brazil-focused funds continued to experience redemptions, indicating weaker investor interest in the commodity-driven segment of the AI investment cycle.

Precious metals, however, showed signs of stabilisation. Gold funds attracted inflows of $317 million, marking their first positive week after cumulative outflows of nearly $14 billion since April. Selling pressure in silver funds has also eased in recent weeks.

However, global industrial funds were still recording flows into their portfolios, but at a slower rate compared to the momentum witnessed ever since April 2025. The real estate sector proved to be a comparatively strong sector, where sector specific funds recorded an inflow of $3.4 billion over the last nine weeks.