India-focused active equity funds have come under renewed redemption pressure after a brief lull. According to Elara Capital’s latest Global Liquidity Tracker Flow report, global investors have sharply increased allocations to commodities, and other emerging markets amid accelerating anti-dollar trades.
After a six week pause between November 20 and January 6, outflows from India-dedicated funds resumed in January. Over the past two weeks, such funds have seen net redemptions of about $680 million, $320 million, and a further $360 million in the past three weeks, the report said.
The selling has been overwhelmingly concentrated in long-only strategies, which accounted for $645 million of the outflows. By domicile, Luxembourg-based funds led the redemptions, with withdrawals of around $330 million, followed by Japan-based funds at $170 million. Notably, redemptions from Japanese funds were the highest in 14 weeks, extending a trend of sustained pressure since November 2024.
US exposure to India continues to be driven by exchange-traded funds (ETFs), which have shown relatively greater resilience, compared to actively managed, India-dedicated strategies, Elara noted.
The divergence underscores 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,” the report said. “While India-focused active funds continue to face persistent redemptions, strong inflows into global emerging market (GEM) funds are simultaneously supporting tactical, index-led allocations into Indian equities, masking the weakness in dedicated long-only participation.”
The anti-dollar theme remains firmly in play globally, reflected in robust inflows into GEM and commodity-linked assets. GEM funds recorded inflows of $8 billion during the week, following $6.6 billion the previous week, marking the strongest inflow phase since January-March 2023.
Commodity-linked flows have also strengthened, with industrial commodity and gold funds logging eight consecutive weeks of inflows, while commodity equity funds surged to a fresh record inflow of $6.5 billion.
Elara said the combination of sustained pressure on India-focused active funds and strong global risk-on flows into emerging markets and commodities suggests that near-term foreign participation in Indian equities is likely to remain increasingly ETF- and index-driven, rather than conviction-led.
Heading for the exit door
- By domicile, Luxembourg-based funds led the redemptions
- US exposure to India continues to be driven by ETFs
- The anti-dollar theme remains firmly in play globally
- Near-term foreign participation in Indian equities likely to remain increasingly ETF- and index-driven
 "India-focused active funds witness renewed outflows after a brief lull")
