Foreign investors might return to India as the global AI trade begins running out of steam

Brokerage Elara Capital said early signs are emerging that the global investor rush into artificial intelligence (AI) and commodity trades may be losing momentum, while foreign fund outflows from India have begun to moderate.

In its latest “Global Liquidity Tracker” report dated May 22, Elara said global emerging markets (EMs) witnessed a sixth straight week of outflows, with another $8 billion redeemed this week after a large $24.4 billion outflow over the previous 15 weeks.

The brokerage said much of the pressure continued to come from China-focused domestic funds, which have seen nearly $79 billion in redemptions since April 2026. Global Emerging Market (GEM) funds also recorded their third consecutive week of outflows.

According to the report, foreign investor money had largely shifted towards markets such as South Korea and Taiwan since April 2025 to benefit from the AI trade, while Brazil gained from the commodity rally, often at the expense of India.

However, Elara said signs of fatigue are now emerging in those trades. South Korea recorded a $1.3 billion outflow three weeks ago followed by another $587 million this week, while Brazil saw its largest redemption since December 2024.

On India, the brokerage said foreign fund outflows remained weak overall, but the pace of redemptions had slowed in recent months.

“India outflows slowed to $702 million in May from $1.5 billion in April and a historic $3.5 billion in March,” the report said.

It added that India-focused fund flows had stabilised over the last two weeks after 11 consecutive weeks of outflows totalling nearly $6 billion. ETF inflows were helping offset selling pressure in long-only funds, the report noted.

Elara also said precious metal flows had turned negative for the first time in two years, while commodity equity funds continued witnessing heavy outflows, indicating that the commodity cycle may be entering a consolidation or reversal phase.