India’s investment market has witnessed a sharp turnaround, with inflows hitting a six-month high of $419 million in March 2025. After 11 consecutive weeks of outflows amounting to $3.6 billion, this surge highlights renewed investor confidence, particularly from U.S.-based funds. The inflows were split between Exchange-Traded Funds (ETFs) and long-only funds, with small-cap investments reaching their highest levels since January 2024. In contrast, China faced significant outflows, losing $532 million in the same period.
India’s investment landscape has seen a remarkable recovery, with inflows reaching a six-month high of $419 million, according to data from Elara Capital. This follows an 11-week streak of consecutive outflows totaling $3.6 billion, marking a significant shift in investor sentiment. The inflows have primarily been driven by U.S.-based funds, signaling renewed global confidence in India’s economic prospects.
Of the total inflow, $239 million was directed toward Exchange-Traded Funds (ETFs), while $180 million flowed into long-only funds. Small-cap funds saw the biggest boost, attracting $88 million, the highest since January 2024. This surge in investment stands in stark contrast to China, which recorded an outflow of $532 million during the same period.
While India’s market experienced a strong inflow, U.S. markets saw a net outflow of $19 billion last week. This marks a shift after 13 weeks of inflows totaling $33 billion. Market analysts remain cautiously optimistic about the overall health of U.S. markets, though concerns persist as the U.S. flow momentum indicator remains in the “euphoria zone.” Historically, peaks in ETF inflows have been followed by market corrections, as seen in 2015, 2017, and 2021.
Meanwhile, Europe has maintained a steady flow of foreign fund investments for the 13th consecutive week. However, despite these inflows, European indices have yet to reclaim their all-time highs from 2000. Japan continues to attract strong foreign investments, with the Nikkei 225 trading at levels last seen in 1990, reflecting a growing appetite for Japanese assets.
In another sign of shifting investment trends, emerging market (EM) technology funds recorded inflows of $2.5 billion in the past week—the highest since October 2024. This comes after a challenging period between October 2024 and February 2025, when substantial outflows were observed. Investors appear to be regaining confidence in EM tech, signaling a potential growth phase for the sector.
India’s resurgence in foreign inflows suggests that global investors see long-term growth potential in its markets. With a stable economic environment and increasing interest in small-cap funds, the country is poised to attract further investment. Market analysts anticipate continued inflows, particularly as India strengthens its position as a key player in the global financial ecosystem.
As India continues to outperform its peers in the emerging market category, this latest surge in inflows signals renewed optimism and a potential turning point for the nation’s investment landscape.
