India Sees $1.4 Billion FPI Inflows in June 2025, Driven by ETFs Amid Active Fund Outflows

In June 2025, India became one of the top destinations for foreign portfolio investments (FPI), recording $1.4 billion in net inflows into listed funds for the second straight month. This rise was powered by Exchange-Traded Funds (ETFs), which brought in $2.4 billion, while actively managed (non-ETF) funds saw outflows of $1 billion, as per data from Kotak Institutional Equities.

ETF vs Active Funds: The Shift Toward Passive Investing

• India-dedicated funds received $726 million in net inflows, with $633 million from ETFs and $93 million from active funds.
• Global Emerging Market (GEM) funds contributed $563 million, largely due to $1.3 billion in ETF inflows, though active funds in this category faced $727 million in outflows.

These trends indicate a growing preference among foreign investors for low-cost passive vehicles over actively managed funds.

India Leads Emerging Markets (Except South Korea)

India was the second-highest recipient of foreign capital among emerging markets in June, behind South Korea ($1.9 bn). Other countries with strong inflows included:

• Brazil: $1.2 billion
• Taiwan: $1 billion
• China: The only major outlier with $36 million in outflows, reflecting continued investor caution.

Fund Allocation Trends

• India’s allocation in Asia ex-Japan funds dipped slightly to 16.3% in June from 16.4% in May.
• In GEM funds, India’s weight fell to 18.7% from 19%, indicating minor rebalancing.
• While ETF allocations remained stable, non-ETF allocations saw a decline, highlighting the shift toward passive investing.

As of June 2025, the total foreign portfolio investor (FPI) assets under custody in India stood at $865 billion.

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U.S. Investors Lead the Pack

The United States remains the largest source of FPI flows into India, with participation from sovereign wealth funds, pension funds, and mutual funds.

Conclusion

India continues to attract strong foreign inflows, especially into ETFs, as investors look for growth opportunities amid global economic uncertainty. The shift away from active funds shows a clear trend toward cost-efficient passive investing. With India's growth outlook remaining positive, it is well-positioned to benefit from ongoing global capital reallocation.

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