Foreign investors exit India funds as AI boom redirects capital. Will inflows return?

Foreign investors pulled around $5 billion from India-focused offshore funds and ETFs in the March quarter, sharply accelerating from $1.8 billion in net outflows in the previous quarter. The asset base of these funds fell 19.5 percent quarter-on-quarter to $77 billion, reflecting both redemptions and a 14.5 percent decline in the Nifty 50. Despite the scale of outflows, several market experts view this as tactical reallocation driven by the global AI trade towards markets like Korea and Taiwan rather than a structural exit from India.