India faces fresh $1.9 bn fund outflows as global money chases commodities

India is once again in the crosshairs of foreign investors pulling money out. According to Elara Securities’ Global Liquidity Tracker, India-focused funds have seen $1.9 billion in outflows over the last seven weeks, marking the second sharp wave of withdrawals in less than a year.

 

The latest exodus comes after a bigger phase between October 2024 and March 2025, when $4.4 billion exited Indian markets. Together, the two cycles underline the nervousness of global investors toward Indian equities at a time when other emerging markets are enjoying record inflows.

 

Japan Reverses Course

 

The reversal is most striking in Japan. Once India’s most reliable foreign backer, Japanese funds brought in $9 billion between January 2023 and September 2024, but have since turned sellers. Since October 2024, $1.1 billion has flowed out of India through Japan-domiciled funds.

 

The report noted that last week alone, India lost $86 million, largely driven by Japanese redemptions.

 

Who is Selling?

 

Breaking down the outflows since July 2025:

 

• ETFs saw the largest pressure, with $1.08 billion pulled out.
• Long-only funds, which typically indicate conviction investors, lost $776 million.
• Large-cap funds were hardest hit, with $1.7 billion in redemptions, showing global money is exiting India’s blue chips.

 

By region:

 

• US investors were the biggest sellers (-$1.02 billion),
• Luxembourg funds pulled out (-$496 million),
• Japan (-$265 million), and
• UK (-$101 million).

 

India-focused funds continue to face redemption pressure, with $1.9bn withdrawn over the past 7 weeks. This marks the second phase of outflows, following the earlier Oct ’24–Mar ’25 episode, when $4.4bn exited India over 6 months.

Global Investors Prefer Commodities and Gold  

While money is leaving India, other emerging markets are seeing powerful inflows. EM commodity funds attracted a record $1.19 billion this week, following $1.14 billion the previous week — their best momentum since 2020.

 

Gold funds remain in favor as a safe-haven play, pulling in another $8.4 billion after last week’s record $16 billion inflows.

 

What This Means for India

 

The consistent selling raises questions about whether foreign investors are losing patience with India’s valuations and growth trajectory, especially with tariff concerns and global trade headwinds dominating headlines.

 

For domestic investors, however, analysts say the picture is less alarming:

 

SIPs (Systematic Investment Plans) continue to provide steady inflows, cushioning the market from extreme volatility.

 

Domestic institutions have been consistent buyers, offsetting part of the foreign outflows.

 

Global fund flows are showing a sharp divergence, with emerging market (EM) commodity and consumer funds attracting record inflows even as India continues to face sustained redemption pressure, noted the  Elara Securities’ Global Liquidity Tracker.

 

Global flows turn mixed

 

The report noted that global equity flows turned negative last week for only the second time in the past three months. While the US received $4 billion in offshore inflows, this was overshadowed by $21 billion in domestic outflows, the highest in six months.

 

In contrast, EM commodity funds are experiencing a powerful recovery, with record inflows of $1.19 billion this week, building on the $1.14 billion inflow in the prior week. This marks the strongest momentum since 2020.

 

Similarly, EM consumer funds are also gaining traction, supported by steady inflows over the past six weeks, reflecting investor optimism around consumption-driven growth in developing economies.

 

Gold funds remain a major beneficiary of global uncertainty. After pulling in a record $16 billion last week, they added another $8.4 billion this week, underscoring their safe-haven appeal amid trade tensions and currency volatility.

 

Outlook

 

The tracker suggests that while India continues to suffer from global risk reallocation and tariff-related pressures, EM commodities and consumption themes are drawing record investor appetite. The resilience in gold flows further indicates hedging behavior in the face of heightened geopolitical and trade uncertainties.