India Misses Record Emerging Market Fund Inflows as Global Investors Turn Selective

Global investors channelled a record $25 billion into emerging market (EM) equity funds during the week ended July 15, marking the strongest weekly inflow since April 2025. However, India failed to participate in the broader rally, with domestic equity funds continuing to record outflows even as investors increased exposure to other emerging markets, according to BofA Global Research.

The latest fund flow data showed global equity funds attracted $55.8 billion during the week, while bond funds received $20 billion. In another development, there was a withdrawal of $119.6 billion from cash funds, which is the highest weekly cash withdrawal since April 2026, signaling an orientation towards risky investments.

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Despite poor foreign portfolio inflows, Indian stock markets were still reacting to both domestic and international factors. It must be noted that the direction in many stocks was based on selective investment and not general buying.

Before turning to the sectoral picture, the report highlighted that technology continued to dominate investor allocations.

Technology Leads Sectoral Buying

Technology funds received $15.6 billion during the week, extending their three-week inflow to a record $48.8 billion. Financial sector funds attracted $2.7 billion, marking their strongest weekly inflow since January 2026 as banking stocks in the U.S., Japan, the U.K. and Europe traded near record or multi-year highs.

The health sector was another one where investors showed constant interest, while other defensive sectors were allocated fewer amounts of investments.

India Continues to See Foreign Outflows

Despite the renewed appetite for emerging markets, India remained under pressure. According to BofA, foreign investors have withdrawn a net $9.26 billion from Indian equity funds so far in 2026. During the latest reporting week, India-focused funds also recorded outflows equivalent to 0.2% of assets under management.

In comparison, Brazil has received net inflows of $3.57 billion this year despite weekly withdrawals, while China, although still facing year-to-date outflows of $220.8 billion, registered a weekly inflow equal to 2.4% of its assets under management.

Market participants also tracked currency movements alongside equity flows, while changes in crude price and global risk sentiment continued to influence foreign investment decisions.

Emerging Markets Recover, But Annual Flows Remain Negative

Although the latest weekly inflow into EM funds was the strongest in over a year, the broader picture remains subdued. BofA data showed emerging market equity funds are still carrying cumulative net outflows of $95.3 billion for 2026.

Developed markets have significantly outperformed on the flow front, attracting net inflows of $723.6 billion during the year. Of this, U.S. equity funds accounted for $356.3 billion, while international developed market funds received $338 billion.

India has also lagged in market performance. BofA’s cross-asset return data showed Indian equities have declined 10.2% in U.S. dollar terms so far this year, while the rupee has weakened 6.6% against the dollar. The report indicates that global investors continue to favour selected markets and sectors rather than adopting a broad-based approach across emerging economies.