**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, during which outflows have already reached $2.3 billion. The current withdrawals represent the largest since the $4.4 billion rout experienced between October 2023 and March 2024.
**Fund Impact: Large-Cap Funds Hardest Hit**
The latest selloff has disproportionately affected large-cap funds, with withdrawals totaling $2 billion during this phase. In contrast, mid- and small-cap funds have largely weathered the storm, each recording redemptions of just about $20 million.
The report further indicates that US-based funds led the withdrawals with $1 billion pulled out, followed by Luxembourg-based investors contributing $765 million, and Japanese funds at $365 million.
**Market Shift: Declining Allocation to India in Emerging Market Portfolios**
This wave of outflows is part of a broader shift within global emerging market (GEM) portfolios. India’s allocation in GEM funds has dropped to 16.7%, its lowest level since November 2023, down from a peak of 21% in September 2024. Meanwhile, China’s share has sharply increased to 28.8%, reflecting a strategic pivot by active fund managers towards the Chinese market.
**Global Trends: Contrasting Movements in Other Markets**
While India continues to experience sustained outflows, US equity funds have seen significant inflows amounting to $10.5 billion this week. Nevertheless, the pace of inflows has slowed following the Trump administration’s tariff announcements in April. During the same period, domestic US funds faced redemptions totaling $2.2 billion.
In other sectors, precious metal funds attracted a record $13.5 billion, and commodity funds extended their winning streak to five consecutive weeks—the longest since 2020. Additionally, high-yield (junk) bonds have maintained steady inflows, with net asset values climbing back to levels last seen in October 2021.
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*Stay tuned for more updates on global investment trends and fund flows.*
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