In its latest Global Liquidity Tracker, Elara said India has emerged as a funding source for a broader global portfolio rotation towards AI beneficiaries, with investors pulling money from India-dedicated funds and reallocating it to regions viewed as more directly exposed to the AI boom.
The brokerage noted that approximately 55% of the inflows received by India-focused active funds during the March 2023 to October 2024 period have now been redeemed. According to the report, most of the withdrawals this year have come from Luxembourg- and Japan-domiciled funds.
The shift comes amid a broader surge in capital flows into US markets. Elara said US equities attracted an unprecedented $120 billion of inflows in a single week, led by exchange-traded funds (ETFs), as investors increasingly concentrated their bets on direct beneficiaries of the AI theme.
Nearly $50 billion flowed into three ETFs tracking the S&P 500, while US mid-cap ETFs recorded a record $20 billion of inflows. US technology sector funds also saw record inflows of $19.2 billion, highlighting investor preference for companies perceived to be at the forefront of AI innovation.
The report also pointed to a strengthening US dollar and rising expectations that interest rates could remain higher for longer as factors supporting the move back into US assets. The dollar index has climbed to a one-year high, according to Elara.
Emerging market funds continued to experience redemptions, although the pace slowed. Elara noted that global emerging market (GEM) funds have increasingly become a proxy for the AI supply-chain trade because South Korea and Taiwan now account for roughly 52% of major emerging market indices.
After six weeks of weakness, foreign flows into South Korea and Taiwan turned positive again, with inflows of $1.3 billion and $600 million, respectively. India and China, however, continued to witness outflows of $440 million and $1.7 billion. Brazil and Mexico also remained under pressure as investors pulled money from commodity- and AI-linked trades.
Elara said the current pattern suggests investors are becoming more selective within the AI theme, increasingly favouring companies and markets viewed as direct beneficiaries rather than broader peripheral ecosystems.
