Redemptions from India-focused funds managed by foreign investors, who are drawn to the country’s growth story, moderated in July 2026, with inflows into exchange traded funds (ETFs) cushioning the overall outflows, according to a research note.

“India continues to show gradual improvement in the pace of foreign selling, although the trend remains negative. The moderation over recent weeks is being led by some inflows into India-focused ETFs, while long-only funds remain persistent sellers, a trend that has continued since Jul’25 and accelerated in CY26,” observed Sunil Jain, Vice President at Elara Capital.

India focussed funds started redeeming their investments in India when the net inflow was little less than $20 billion in July 2025 and has continued for a year now. As of July 2026, the foreign funds are now at levels less than $9 billion.

Nearly “65% of the cumulative inflows received by India-focused long-only funds during 2023–24 have now been withdrawn. Some support is beginning to emerge from U.S.-domiciled ETFs, while Japan and Luxembourg remain the biggest sources of pressure, having already withdrawn roughly 50–60% of the capital they invested during 2022–24,” the report said. “While the moderation in the pace of redemptions is encouraging, a sustained reversal in flows is still awaited.”

Foreign portfolio investors’ (FPIs) pullback has resulted in net outflows of ₹2.4 lakh crore as of August 14. The sustained selling has weighed on the rupee and tempered market sentiment. Year-to-date, the Nifty has declined nearly 6%. Domestic investors, including mutual funds and institutional investors, however, have continued to provide support to the market.

Published - August 14, 2026 09:31 pm IST