Heavy redemptions were seen in China, Japan, and Europe, signalling a deterioration in risk appetite towards emerging markets (EMs) and commodity-linked themes amid lingering uncertainty surrounding the US-Iran deal.
EMs remained under pressure, registering their seventh consecutive week of outflows. The weakness was driven by domestic selling in China and continued foreign investor withdrawals from India. Global emerging market (GEM) funds also extended their redemption streak to four weeks — the first such run since March 2025 — taking cumulative outflows to $4.2 billion.
The trend points to a meaningful slowdown in investor appetite for emerging-market assets, even as allocations continue to gravitate towards a narrower set of opportunities, said Sunil Jain, vice president at Elara Capital.
EM performance was mixed in May. South Korea and Taiwan surged 28 per cent and 15 per cent, respectively, while Indonesia, Brazil, and India declined 12 per cent, 7 per cent, and 3 per cent, respectively.
India witnessed a fresh round of redemptions, with overseas investors withdrawing $463 million last week. The latest outflow comes after a brief period of stabilisation in foreign flows. Overall, foreign portfolio investor (FPI) outflows in May (up to May 27) stood at ₹34,000 crore, lower than the outflows seen in March (₹1.22 trillion) and April (₹70,000 crore).
India saw a resumption of redemptions, with overseas investors withdrawing $463 million last week. The latest outflow comes after a brief period of stabilisation in foreign flows. Overall, foreign portfolio investor (FPI) outflows in May at ₹34,000 crore (up to May 27) were muted compared to March (-₹1.22 trillion) and April (-₹70,000 crore)
Meanwhile, US-focused and global mandate funds remained the only major categories to attract sustained inflows. Technology, industrial, and semiconductor funds saw the strongest allocations, underscoring investors’ continued preference for artificial intelligence (AI)-linked themes, the Elara Capital note said.
The shift in investor preferences was also evident across commodities. Precious metal funds suffered another $1.1 billion in outflows during the week. Silver was the first major commodity to lose momentum in January 2026, followed by gold from March onwards.
“Taken together, several themes that benefited from the AI and electrification trade — South Korea, Taiwan, Brazil, Silver, Gold, Commodities and Energy — are now witnessing slowing or negative flow. The only segment with strong flows is US tech, industrials and semiconductor,” the note added.
 "fund")