India is witnessing a significant withdrawal of foreign investment in 2026 as global investors shift their focus toward markets benefiting directly from the artificial intelligence (AI) revolution.
According to a recent Global Liquidity Tracker report by Elara Securities, more than half of the foreign money invested in India-focused equity funds between March 2023 and October 2024 has already been withdrawn. The report estimates that nearly 55% of those inflows have exited the Indian market, with funds domiciled in Luxembourg and Japan leading the redemptions.
AI Opportunities Driving Capital Rotation
The primary reason behind the outflows is the global rush toward AI-driven investment opportunities. Investors are increasingly allocating capital to markets such as the United States, Taiwan, South Korea, and Japan, where companies are seen as major beneficiaries of the AI boom.
The United States alone attracted an estimated $120 billion in equity inflows in a recent week, largely through exchange-traded funds (ETFs), reflecting strong investor confidence in technology and AI-related sectors.
India and China Under Pressure
While AI-focused markets continue to attract record investments, both India and China have experienced sustained outflows. In the last two weeks alone, India reportedly witnessed outflows of approximately $1.7 billion, while China saw withdrawals of around $440 million.
Analysts suggest that the relative absence of globally dominant AI-focused companies in both countries has reduced their appeal among international investors seeking exposure to the technology sector.
Strong Gains in AI-Driven Markets
Several global markets have delivered exceptional returns in 2026:
- South Korea’s Kospi index has surged more than 200%, driven by technology giants such as Samsung and SK Hynix.
- Taiwan’s Taiex index has climbed around 62% year-to-date.
- Japan’s Nikkei 225 has gained nearly 40%.
- The technology-heavy Nasdaq index in the United States has advanced approximately 14%.
These markets have benefited from strong demand for semiconductors, AI infrastructure, and advanced technology manufacturing.
Emerging Market Funds Becoming AI-Focused
The report notes that global emerging market funds are increasingly becoming vehicles for AI-related investments. South Korea and Taiwan now account for roughly 52% of benchmark emerging market indices, reflecting their growing importance in the global technology supply chain.
Precious Metals Also See Outflows
Investors have also been reducing exposure to precious metals. Outflows from precious metal funds reached a 12-week high of nearly $3 billion, taking total withdrawals since March to around $18 billion as investors shifted capital toward higher-growth opportunities.
Outlook for India
Despite the recent outflows, market experts believe India’s long-term growth story remains intact. However, attracting a larger share of global capital may require stronger participation in emerging sectors such as artificial intelligence, semiconductor manufacturing, advanced technology, and digital infrastructure.
As AI continues to reshape global investment trends, competition for international capital is expected to intensify among both developed and emerging economies.