**Foreign Investors Withdraw $244M, Triggering Second Wave of Outflows**
*By Akash Pandey | Sep 29, 2025 11:06 AM*
Foreign investors have pulled out a staggering $244 million from India-focused funds this week, according to a recent report by Elara Capital. This marks the second major wave of redemptions since July, contributing to a total outflow of $2.3 billion. Notably, this is the largest withdrawal since the significant $4.4 billion rout that occurred between October 2023 and March 2024.
**Impact on Funds**
Large-cap funds have been hit the hardest during this selloff, with withdrawals totaling $2 billion in this phase alone. In contrast, mid- and small-cap funds have largely been spared, experiencing redemptions of roughly $20 million each.
Geographically, US-based funds led the withdrawals with $1 billion pulled out, followed by Luxembourg-based investors at $765 million and Japan at $365 million.
**Shifting Global Market Preferences**
The outflows are driven by a notable shift in global emerging market (GEM) portfolios. Allocation to India in GEM funds has dropped to 16.7%, marking its lowest level since November 2023 and down from a peak of 21% in September 2024. Meanwhile, China’s share has surged to 28.8%, indicating a clear pivot by active portfolio managers towards the Chinese market.
**Global Trends**
Despite sustained outflows from India, US equity funds attracted $10.5 billion this week. However, the pace of inflows has slowed since the Trump administration’s tariff announcement in April. Interestingly, domestic US funds experienced redemptions totaling $2.2 billion over the same period.
Precious metal funds saw record inflows of $13.5 billion, while commodity funds extended their winning streak to five consecutive weeks — the longest since 2020. Additionally, high-yield or junk bonds continued to attract steady inflows, with net asset values climbing back to levels last seen in October 2021.
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This recent wave of foreign investor exits underscores the evolving dynamics in global capital flows, especially within emerging markets, where shifting geopolitical and economic factors continue to influence investment decisions.
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