Global Funds Return To Emerging Markets After Correction; India Sees Early Recovery

Global industrial funds have recorded negative rolling four-week flows for the first time since the AI trade began in May 2025, while investors have started selectively buying the dip in emerging markets after the recent correction, according to Elara Capital's latest Global Liquidity Tracker.

With the Emerging Markets (EM) Index correcting around 10% from its peak, Global Emerging Market (GEM) funds attracted $1.9 billion of inflows in the latest week, following $1.8 billion in the previous week. The two-week inflow of $3.7 billion has reversed around 28% of the $13 billion redeemed over the preceding 10 weeks, suggesting investors have begun selectively adding exposure after the correction.

Meanwhile, US equity funds recorded another $6 billion of outflows, marking the third week of redemptions in the past five weeks. Elara said the exceptional inflow momentum into US equities has begun to moderate following the SpaceX listing.

India Flows Show Early Signs Of Stabilising

India-focused fund flows also showed early signs of stabilising after months of sustained outflows. Redemptions paused after cumulative outflows of $8.6 billion since February, although net inflows remained modest at $17 million during the latest week.

The recovery was driven by India-focused exchange-traded funds (ETFs), which attracted $118 million, while active long-only funds continued to witness outflows of $101 million.

At the country level, India received $184 million, its strongest weekly inflow since March, indicating foreign investor positioning has become less negative in recent weeks.

Tech Funds Continues To Lead AI Investment Theme

Technology funds remained the preferred destination for global investors, reaffirming continued interest in direct beneficiaries of the artificial intelligence (AI) theme.

In contrast, global industrial funds recorded negative rolling four-week flows for the first time since the AI trade began in May 2025, marking the first meaningful break in momentum for the sector after more than a year of sustained inflows.

Elara said the trend suggests investors are becoming more selective within the broader AI ecosystem, favouring technology companies over the wider AI supply chain.

Domestic Investors Back Taiwan, South Korea

While foreign inflows into Taiwan and South Korea moderated, domestic investors continued to provide strong support during recent market corrections.

Taiwan's domestic funds recorded their second-largest weekly inflow of $4.8 billion, with the previous record also coming immediately after the June market correction.

Similarly, South Korea witnessed a sharp pickup in domestic inflows during its recent three-week correction, highlighting continued buying by local investors even as foreign participation turned more selective.

Among other asset classes, gold funds recorded their largest weekly inflow since mid-April, while silver fund flows continued to stabilise after several months of heavy redemptions.

Consumption funds, which have seen persistent outflows since November 2025 as investors shifted towards AI-related investments, continued to witness redemptions. However, Elara noted that the pace of outflows has slowed in recent weeks, suggesting selling pressure in the segment may be easing.