Indian equities experienced $2.3 billion in outflows since July 2025, as Global Emerging Market (GEM) funds cut their allocation to India to 16.7%, the lowest level in 22 months, according to the Elara Global Liquidity Tracker. At the same time, China’s allocation in GEM funds climbed sharply to 28.8%, signaling a shift in global investor preference.
India’s Allocation Declines
India’s share in GEM portfolios has fallen from 21% in September 2024 to 16.7% in September 2025, marking a clear downward trend. The bulk of the outflows—around $2 billion—came from large-cap funds, while mid- and small-cap funds experienced modest withdrawals of roughly $20 million each. The sustained outflows underscore rising investor caution amid changing global and domestic macroeconomic conditions.
China Gains as GEM Favourite
As India’s allocation contracted, China emerged as the new focus of GEM investors, with its portfolio share increasing to 28.8%. This shift reflects fund managers’ preference for Chinese equities, driven by policy cues, improved macroeconomic indicators, and expectations of higher returns relative to other emerging markets.
Regional Sources of Outflows
The largest withdrawals were reported from US-based funds ($1 billion), followed by Luxembourg ($765 million) and Japan ($365 million). India-focused funds alone recorded $244 million in outflows during the week, up from $183 million the prior week, highlighting increased redemption pressure on Indian assets.
Global Asset Flows Show Tilt Towards Other Investments
Despite risk-off sentiment in emerging markets, US equities saw strong inflows of $10.5 billion, while precious metals funds attracted $13.5 billion, marking a record week. Commodity funds posted their fifth consecutive week of inflows, and high-yield bond funds continued to garner investor interest, suggesting a broader rotation towards perceived safe-haven and high-return assets globally.
Summary:
- GEM funds reduced India allocation to 16.7%, causing $2.3 billion outflows since July 2025.
- China’s share in GEM portfolios rose to 28.8%, becoming the top emerging market favourite.
- Outflows were led by US, Luxembourg, and Japanese funds, mainly from large-cap Indian stocks.
- Global investors are reallocating towards US equities, precious metals, commodities, and high-yield bonds.
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