India inflows hit 6-month high at $419 mn as US funds see $19 bn redemption

India has emerged as the standout performer, with dedicated inflows surging to a six-month high of $419 million. This influx follows 11 consecutive weeks of redemptions, totaling $3.6 billion, shows data analysed by Elara Capital. 

 

The inflows were largely driven by U.S.-domiciled funds.

 

Notably, $239 million of the inflow was directed toward Exchange-Traded Funds (ETFs), while $180 million flowed into long-only funds. Small-cap funds, in particular, saw a notable surge, with $88 million in inflows, marking the highest figure since January 2024. This influx of funds into India is a sharp contrast to the situation in China, which saw a significant outflow of $532 million during the same period. 

  What this means? 

India just got a huge boost, with $419 million flowing into its markets, which is the highest it's been in the last six months. This is especially interesting because for the past couple of months, investors were actually pulling money out of India. Now, people from the U.S. have started putting money back into India, particularly in smaller companies.

 

On the other hand, U.S. markets experienced a $19 billion pullout last week, meaning investors took that much money out of U.S.-based funds. This came after a long period of big investments, so it’s like people are getting a little cautious and pulling some money out. Even though this is a big number, experts are still confident that overall, U.S. markets are doing well.

 

While the U.S. market saw $19 billion in redemptions last week, after a 13-week streak of large inflows amounting to $33 billion, the broader trend of inflows into U.S. markets remains resilient. However, concerns are mounting as the U.S. flow momentum indicator lingers in the "euphoria zone," a level that historically has signaled caution. ETF flows, in particular, have been a reliable precursor to market corrections in the past. For example, a peak in ETF flows in November 2021 was followed by a 28% decline in the S&P 500, while similar patterns in 2017 and 2015 preceded significant market pullbacks.

 

Despite these occasional fluctuations in U.S. fund flows, the broader trend remains positive, suggesting continued investor confidence in the U.S. market. The $19 billion redemption may simply be a natural market correction.

 

Meanwhile, foreign fund flows into Europe have remained robust for the 13th consecutive week. However, despite these sustained inflows, the European index has yet to surpass its highs from the year 2000, indicating that investor sentiment in the region remains cautious despite the inflows. In Japan, foreign investment continues to be strong, with the Nikkei 225 index trading near levels not seen since 1990, reflecting the ongoing attraction of Japanese assets.

 

In a broader context, emerging market (EM) technology funds have seen a notable resurgence in recent weeks, with $2.5 billion pouring in over the last week alone. This marks the largest inflow into EM tech since October 2024, signaling a positive shift after a challenging period from October 2024 to February 2025, when significant outflows were recorded. This improvement in the trend of EM tech funds highlights a growing optimism among investors toward technology in emerging markets.