AI rally shows signs of maturing as global funds post first outflows since May 2025; India records $184 mn in inflows

Global industrial funds have recorded their first sustained outflows over the past four weeks for the first time since the artificial intelligence (AI)-driven market rally began in May 2025, even as technology funds continue to attract the strongest inflows. At the same time, India-focussed fund flows are showing early signs of stabilisation after months of persistent foreign selling, according to Elara Securities.

"Global Industrial funds recorded negative rolling four-week flows for the first time since the AI trade began in May'25. Technology funds continue to attract the strongest inflows, reaffirming that investors continue to favour direct AI beneficiaries over the wider AI supply chain," Elara Securities said in a recent report.

Beyond equities, commodity fund flows also reflected changing investor preferences. Gold funds recorded their strongest weekly inflow since mid-April, indicating renewed demand for safe-haven assets amid market uncertainty. Silver fund flows also continued to stabilise after several months of heavy redemptions.

“Gold funds recorded largest weekly inflow since mid-April, while silver fund flows continued to stabilise after several months of heavy redemptions,” the report noted.

Meanwhile, consumption-focussed funds, which have faced persistent outflows since November 2025 as capital shifted toward AI-related themes, are showing signs that the pace of redemptions is beginning to slow.

India sees early signs of foreign flow recovery

India, meanwhile, is beginning to witness a turnaround in foreign investor sentiment.

According to the report, redemptions from India-focussed funds paused after cumulative outflows of $8.6 billion since February. Although net inflows remained modest at $17 million during the week, the trend suggests that the sharp phase of withdrawals may be easing.

The recovery was led by exchange-traded funds (ETFs), which attracted net inflows of $118 million, while actively managed long-only funds continued to see outflows of $101 million.

At the country level, India received net inflows of $184 million, the strongest weekly foreign inflow since March, indicating that overseas investors have become less bearish on Indian equities.

“The recovery was driven by India-focussed ETFs (+$118mn), while active long-only funds continued to witness outflows (-$101mn). At the country level, India attracted $184mn, the strongest weekly inflow since March, suggesting foreign positioning has become less negative lately,” the report said.

Emerging markets attract fresh capital

As per the report, globally, investors have also begun selectively returning to emerging markets after the MSCI Emerging Markets Index corrected about 10% from its recent peak. Global Emerging Market (GEM) funds attracted $1.9 billion during the week, following inflows of $1.8 billion in the previous week. The cumulative two-week inflow of $3.7 billion has reversed nearly 28% of the $13 billion redeemed over the previous 10 weeks.

In contrast, US equity funds registered another weekly outflow of $6 billion, marking the third week of redemptions in the last five weeks. According to Elara, this suggests that the exceptional flow momentum into US equities has started moderating following the SpaceX listing.

The report also highlighted divergent trends across Asian markets. While foreign inflows into Taiwan and South Korea continued to moderate, domestic investors remained aggressive buyers during the recent market correction. Taiwan's domestic funds recorded their second-largest weekly inflow of $4.8 billion, while South Korea also witnessed a sharp rise in local buying during its three-week correction.