Foreign Inflows into India-Focused Funds Plummet by Nearly 60% Since 2024 Peak, According to Report

The recent analysis from Elara Capital reveals a significant shift in foreign investment dynamics affecting India-focused equity funds. During the investment rally spanning from March 2023 to October 2024, these funds attracted approximately USD 20 billion. However, nearly 60% of this influx, amounting to around USD 12 billion, has been retracted as global investors pivot towards opportunities linked to artificial intelligence (AI). This ongoing trend has intensified since January 2026, as redemptions primarily aim to capitalize on the prevailing AI momentum.

So far in 2026, investors have pulled out around USD 9 billion, with long-only funds being the hardest hit, accounting for USD 7 billion of the total redemptions, while exchange-traded funds (ETFs) faced withdrawals of USD 2 billion. Notably, Luxembourg was the epicenter of these redemptions at USD 3.5 billion, followed by the United States and Japan with USD 2.4 billion and USD 2.1 billion, respectively. In contrast, Ireland has remained largely insulated from this selling pressure, highlighting geographical variations in investor sentiment.

The report underscores that the current market sentiment is heavily influenced by a selective approach towards AI investments. While the broader AI ecosystem appears to be losing momentum, interest has shifted towards a narrower group of beneficiaries within the sector. This heightened selectivity is reflected in the dwindling inflows to global emerging market (GEM) funds, which have traditionally served as proxies for the AI value-chain trade. Nevertheless, there are signs of renewed interest in South Korean and Taiwanese funds, following a correction in April-May, albeit at a more cautious pace than during earlier peaks in AI enthusiasm.