Summary of this article
Foreign investors resume selling India-focused active equity funds
Outflows led by Luxembourg, Japan-based long-only strategies
Global EM and commodity flows remain strong despite India redemptions
Foreign investors have resumed selling India-focused active equity funds after a brief pause, even as global money continues to pour into emerging market indices and commodities, according to The Global Liquidity Tracker report by Elara Securities.
The report said a fresh leg of redemptions has re-emerged in India-focused funds, following a six-week lull between November 20, 2025, and January 6, 2026. “While intermittent pauses in redemptions have occurred, the underlying long-term trend remains negative,” the report noted.
Over the past two weeks, since January 8, India-dedicated funds witnessed outflows of USD 680 million, with USD 320 million redeemed in the first week and USD 360 million in the following week. Elara said the selling pressure is entirely concentrated in long-only strategies, which accounted for USD 645 million of the total outflows.
The current redemption cycle has been driven primarily by Luxembourg-domiciled funds, which saw withdrawals of USD 330 million, followed by Japan-based funds with outflows of USD 170 million. The report highlighted that “redemptions from Japan-based funds are largest in 14 weeks, extending a trend of sustained pressure since Nov’24”.
In contrast, funds domiciled in the US and Ireland have remained largely stable. According to the report, “US exposure to India remains ETF-driven and relatively resilient,” underscoring a divergence in foreign investor behaviour toward Indian equities.
The report said this divergence reflects a structural shift in foreign portfolio allocation to India. “India is increasingly being approached as a top-down allocation rather than a bottom-up conviction trade by foreign investors,” says the report. While India-focused active funds continue to face persistent redemption pressure, the report added that accelerating inflows into global emerging market (GEM) funds are driving tactical, index-led allocations into India, thereby “masking the weakness in dedicated long-only participation”.
At the global level, as per the report, the anti-dollar theme remains firmly in play, supporting flows into emerging markets and commodities. GEM (Global Emerging Market) fund inflows accelerated to a record USD 8 billion in the latest week, following USD 6.6 billion the previous week, marking the strongest inflow phase since January-March 2023. Industrial commodity and gold funds have recorded eight consecutive weeks of inflows, while commodity equity fund inflows surged to a fresh record of USD 6.5 billion, the report said.
