Foreign funds exit India amid AI boom: will inflows return?

Foreign investors pulled billions of dollars from India-focused offshore funds in the March quarter as money rotated towards artificial intelligence (AI)-linked markets and away from emerging market exposure, even as some investors say India’s macro outlook is starting to stabilize.

- Dipti Sharma

India-focused offshore funds and exchange traded funds (ETFs) recorded net outflows of $5 billion in the three months to March, Morningstar’s Offshore Fund Spy report said. That marks a sharp acceleration from $1.8 billion in the previous quarter.

At the same time, the asset base of India-focused offshore funds and ETFs fell 19.5% sequentially to $77 billion from $95.7 billion, the report said, reflecting both redemptions and a 14.5% fall in the Nifty 50 during the quarter.

The shift comes amid a broader global rotation in which investors increased allocations to AI-linked opportunities, where earnings momentum has been stronger. Markets such as Korea and Taiwan emerged as key beneficiaries within the emerging markets universe, according to market participants.