Nearly 60 per cent of the foreign money that flowed into India-focused equity funds during the 2023-24 investment rally has now been withdrawn as global investors continue to shift capital towards artificial intelligence (AI)-linked opportunities, according to an Elara Capital research report.
“Almost 60% of inflows that India focused funds saw in 2023-24 period has been pulled out. Redemptions have accelerated since Jan’26 to fund the AI trade & momentum continues to remain weak,” the report said.
According to the report, investors have withdrawn USD 9 billion from India-focused funds so far in calendar year 2026, including USD 7 billion from long-only funds and USD 2 billion from exchange-traded funds (ETFs).
The report said Luxembourg accounted for the largest share of redemptions at USD 3.5 billion, followed by the United States at USD 2.4 billion and Japan at USD 2.1 billion, while Ireland remained the only major fund domicile to largely avoid the current round of selling.
Elara Capital said the shift in investor preference is being driven by the global AI investment theme, although buying has become more selective than during the initial rally.
“The broader AI ecosystem trade continues to lose momentum, although investors remain selective within the theme,” the report said.
It added that global emerging market (GEM) funds, which had increasingly become a proxy for the AI value-chain trade, continue to witness outflows.
“The AI trade is becoming concentrated in a few direct beneficiaries rather than the broader ecosystem,” the report noted, adding that foreign investors have resumed buying dedicated South Korea and Taiwan funds following the April-May correction, albeit at a much slower pace than during the peak of the AI rally.
The report also highlighted improving investor sentiment towards some other asset classes.
Gold funds recorded a USD 317 million inflow during the week, marking the first positive reading after nearly USD 14 billion of outflows since April.
“Gold funds recorded a modest inflow of $317mn, the first positive reading after $14bn outflows since Apr, while pressure on Silver funds has also eased over recent weeks,” the report said.
Meanwhile, US equities attracted USD 27 billion in fresh inflows, reversing the withdrawals seen over the previous two weeks, while Europe registered its first weekly inflow in nearly three months, the report added.