U.S. equity outflows extend to second week at $17 bn; Indian equities record $580 mn foreign withdrawals

Investors pulled $17 billion from U.S. equity funds last week, marking the second consecutive week of outflows, while Indian equities witnessed foreign outflows of $580 million, according to a report by Elara Capital.

The report said U.S. equity funds witnessed a second straight week of outflows, a relatively rare occurrence last seen in January 2026 and February 2025. The latest redemptions follow $8 billion of outflows in the previous week and come just three weeks after U.S. equity funds attracted a record $120 billion in inflows.

According to Elara Capital, the reversal indicates that the strong momentum behind U.S. equity allocations, fuelled largely by artificial intelligence (AI)-related positioning, may be beginning to moderate.

The report highlighted that exchange-traded funds (ETFs) accounted for nearly $9 billion of the latest withdrawals, marking the first ETF redemption since March 2026, when markets were unsettled by the Iran conflict.

Emerging markets record 9th consecutive week of outflows

The weakness extended to emerging markets (EMs), where equity funds recorded their ninth consecutive week of outflows. Redemptions accelerated to $2 billion from $500 million a week earlier, making it the longest streak of outflows since the 2022-23 period.

Elara Capital said the broad EM allocation trade that gathered pace during April-May 2025, driven by optimism around AI-led growth, is now losing traction.

At the country level, selling pressure has spread beyond India and China to markets that had earlier benefited from AI and commodity-related investment themes.

Taiwan witnessed an 11-year-high foreign outflow of $766 million, while Brazil remained the weakest market, with cumulative withdrawals of nearly $2 billion over the past seven weeks, wiping out all inflows since April 2026. South Korea also remained under pressure, although outflows slowed to $283 million.

India records $580 million in outflows

India, which had seen a brief respite in foreign selling, again witnessed higher outflows during the week. Foreign investors withdrew $580 million, compared with $94 million in the previous week.

Of the total outflows, India-focused funds accounted for $250 million, while the remaining $330 million came from allocations to Global Emerging Market (GEM) and Asia ex-Japan (AXJ) funds.

However, Elara Capital noted that the latest selling remains significantly lower than the peak pressure witnessed during March-April 2026, when weekly outflows from Indian equities averaged nearly $1 billion.

Sectoral fund flows also reflected weakening investor sentiment. Global commodity equity funds extended their outflow streak to eight consecutive weeks, with investors withdrawing $1.5 billion, the highest weekly redemption since March 2026.

Energy funds recorded their sixth straight week of outflows, with a record $3.2 billion in redemptions. In contrast, industrial sector funds saw a modest recovery, attracting $222 million after witnessing a 12-year record outflow of $1.5 billion in the previous week.

Among precious metals, gold funds saw 14-week-high outflows of $3.1 billion, while flows into silver funds remained broadly stable.

The report suggests global investors are becoming increasingly selective in allocating capital, with enthusiasm for AI-driven and emerging market trades cooling after a prolonged period of strong inflows.

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)