India Sees $2.3 Billion Outflows as GEM Funds Cut Allocation to 16.7%, China Rises to 28.8%

According to the Elara Global Liquidity Tracker, India has recorded $2.3 billion in fund outflows since July 2025 as Global Emerging Market (GEM) funds reduced their allocations. This marks a notable declining trend for Indian equities, while China's allocation has surged to a dominant share in the GEM portfolio.

India’s Share in GEM Funds Hits 22-Month Low

As of September 2025, India’s allocation in GEM funds has dipped to 16.7%, the lowest since November 2023. This represents a sharp fall from the 21% peak seen in September 2024. The outflows began in July 2025 and have since totalled $2.3 billion, with large-cap funds accounting for a major part of the exodus at $2 billion. Mid- and small-cap funds have seen modest outflows of around $20 million each.

China Emerges as New GEM Favourite

While India declines, China’s slice in GEM allocations has risen steeply to 28.8%. This move reverses the recent trend where India was favoured over China in global portfolios. The reversal signals a strategic preference among fund managers to shift capital towards Chinese equities amid changing macroeconomic indicators and policy cues.

Outflows Originated Mainly from US and European Funds

The highest withdrawals this week were from US-based funds, which pulled $1 billion from India. Luxembourg and Japan followed with outflows of $765 million and $365 million, respectively. Additionally, India-focused funds alone saw $244 million in outflows this week, up from $183 million last week, indicating rising redemption pressure.

Read More: Foreign Investors Pull Out $21.5 Billion From Indian Markets In 2025 Amid Global Outperformance!

Broader Global Flow Trends Show Tilt Towards Other Assets

Globally, assets like US equities and precious metals are attracting strong inflows. US markets witnessed $10.5 billion in foreign inflows, and precious metals funds drew a record $13.5 billion. Commodity funds posted their fifth straight week of inflows, marking the strongest momentum since 2020. Despite global risk-off sentiments, high-yield bond funds are also gaining consistent interest.

Conclusion

India’s $2.3 billion outflows, driven by declining GEM fund allocations, indicate a significant change in investor sentiment. With China’s share climbing to 28.8%, global fund flows are signalling a clear shift in regional preferences. Asset classes beyond equities, including metals and bonds, are currently outperforming in terms of investor interest.

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