**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 report by Elara Capital. This marks the second significant wave of redemptions since July, amounting to a total outflow of $2.3 billion. The current withdrawal is the largest since the $4.4 billion rout recorded between October 2023 and March 2024.
**Fund Impact: Large-Cap Funds Hit Hardest**
The latest selloff has predominantly affected large-cap funds, which experienced withdrawals totaling $2 billion during this period. In contrast, mid- and small-cap funds have largely remained resilient, with redemptions of just about $20 million each.
Geographically, US-based funds led the withdrawal trend with $1 billion pulled out, followed by Luxembourg-based funds at $765 million and Japanese funds at $365 million.
**Market Shift: Changing Global Emerging Market Portfolios**
This wave of outflows is driven by a notable shift in global emerging market (GEM) portfolios. India’s allocation in GEM funds has decreased to 16.7%, its lowest level since November 2023, down from a peak of 21% in September 2024. Meanwhile, China’s share in these portfolios has surged to 28.8%, signaling a strong pivot by active fund managers toward Chinese markets.
**Global Trends: US Equity and Commodity Funds Show Mixed Movements**
Amid sustained outflows from India, US equity funds attracted significant inflows worth $10.5 billion this week. However, this momentum has slowed following the Trump administration’s tariff announcement in April. Domestic US funds recorded redemptions totaling $2.2 billion during the same period.
Precious metal funds saw record inflows, drawing $13.5 billion, while commodity funds extended their winning streak to five consecutive weeks—the longest run since 2020.
Interestingly, high-yield or junk bonds continued to attract steady inflows, with net asset values climbing back to levels last seen in October 2021.
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The ongoing shifts underline the evolving preferences of global investors, emphasizing the need for close monitoring of emerging market dynamics and sector-specific trends.
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