AI trade, which has been in the global markets for the last one year, now seems to be slowing down. Foreign investors had earlier increased investment in AI-related Asian markets, especially South Korea and Taiwan, while money was continuously being withdrawn from India. Now there are signs of change in this trend. According to brokerage firm Elara Securities, the outflow of foreign investors from India is gradually decreasing, while pressure on markets like South Korea, Taiwan and Brazil is also increasing.
According to the report, there has been a withdrawal of foreign investors from emerging markets for the sixth consecutive week. An outflow of about $8 billion was recorded this week, while $24.4 billion had been withdrawn in the last 15 weeks. The most pressure remains on China-focused domestic funds, where about $79 billion has been withdrawn since April 2026. Weakness is also being seen in Global Emerging Market (GEM) funds. There was an outflow in these funds for the third consecutive week and this time 738 million dollars were withdrawn. Earlier, a withdrawal of $2.6 billion was recorded in eight weeks.
There was heavy selling in these funds
Elara says that the most selling pressure is visible in active long-only funds, while ETF flows still remain mildly positive. This means that the risk appetite of investors is weakening, but passive investing has not yet completely gone out of the market.
From April 2025, foreign investors had invested heavily in technology-based markets like South Korea and Taiwan to take advantage of the AI boom. Brazil also benefited from the commodity rally. During this period, India was included in those markets from where money was withdrawn and invested in other countries.
Selling from South Korea
However, now this trend seems to be changing. There was a record outflow of $1.3 billion in South Korea three weeks ago, while this week also $587 million was withdrawn. The pace of investment in Taiwan has slowed down and Brazil recorded the largest outflow of $230 million after December 2024.
It is a matter of relief for India that the selling by foreign investors now seems to be reducing. There was a withdrawal of $702 million from India-focused funds in May, compared to $1.5 billion in April and a record $3.5 billion in March. Stability has also been seen in India-focused funds in the last two weeks.
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