The selloff by foreign portfolio investors (FPIs) has crossed $11.23 billion in just 32 trading sessions since the year began with the benchmark Nifty coming off 3.74% YTD. The only positive streak amid the carnage on the Street is that for the first time in over four months, the relentless selling spree by US-based funds in Indian equities is cooling off.

While this might seem like the turning point the Indian markets have been desperately waiting for, the reality is more complicated. The fire-sale has merely shifted to new battlegrounds, with fresh fund outflows emerging from Ireland, Luxembourg, Japan, and the UK. Ireland alone saw $103 million in outflows this week, followed by Luxembourg with $88 million, Japan with $46 million, and the UK, where redemptions have been gradually building since November, now totalling a staggering $435 million. Unlike the ETF-driven flows from the US, these redemptions are coming from active funds, meaning India’s biggest and most widely held stocks could face even more pronounced corrections in the coming weeks.

Meanwhile, as foreign investors exit India, they are rapidly shifting their focus elsewhere. Europe, in particular, has emerged as the hot favourite among global investors, attracting its highest inflows since January 2023. The Euro Stoxx 50 index has roared back to levels last seen in the year 2000, triggering a wave of fresh capital pouring into the continent. In just a week, according Elara Capital, European equity funds saw a staggering $2.5 billion in inflows, led by Germany with $930 million, Switzerland with $824 million, France with $658 million, and the Netherlands with $344 million.

Compounding India’s woes is that China is making a comeback. For months, China had been reeling from a sustained outflow of foreign capital, much like India. “But in the past two weeks, that trend has sharply reversed. We have seen marginal flows in China,” points out Sunil Jain, who tracks global flows at Elara Capital. This week alone, China saw an inflow of $573 million — the highest since October 2024. Global fund managers appear to be gradually rotating capital away from India and into China, lured by cheaper valuations and improving sentiment around Beijing’s economic policies. Alongside the resurgence in Chinese inflows, there is also a revival in commodity-based funds. The emerging market commodity and materials sector saw its largest inflow since August 2023, totalling $92 million, hinting at a broader shift in investor preferences toward hard assets.

global capital flows

FPI outflows cross $11 billion as investors chase Europe, China equities