Equity investors cling-on as ‘smart money' leaves India
Net contribution into systematic investment plan increased 4.1% to ₹28,464 crore in the reporting month as against ₹27,269 crore.
Commenting on the numbers, the Chief Executive Officer of AMFI Venkat Chalasani said that Indian investors were showing a lot of faith in India's growth story, while acknowledging the uncertainties from tariff, which he said were 'temporary.'
'They (Indian investors) are having confidence in the growth story of the country, and this volatility would be of a temporary nature. Probably this is what they are looking at, and therefore, positive This is why they are keeping their long-term investment intact and that's the reason why we have seen continuous flows,' said Mr. Chalasani in the call presenting the monthly data update.
While Indian asset management companies and mutual fund houses have time and again assured the market about the 'India growth story,' foreign investors who have that as their investment thesis, have started exiting the market, according to an Elara Capital report.
Sunil Jain, Vice President of Elara Capital, said that 'smart money' was moving out of the Indian markets. These are foreign funds which are focused completely on India with conviction on India's long-term growth story. These were the funds that fuelled the 2023-24 rally, which lasted till October 2024, after which Donald Trump's election victory changed sentiments. 'From then until March 2025, India witnessed a redemption cycle primarily in this smart-money bucket,' said Mr.Jain in a report.
The current pattern of redemptions is similar to the one noticed in March 2007 and April 2011, and the previous such instances were followed by a deterioration in the market, he said.
Active India-focussed funds, which hold about $68 billion, are now moving towards more macro-focused Exchange Traded Fund allocation, Mr. Jain said in his research report. As of July 31 2025, foreign portfolio investors sold a net of ₹17741 crore in Indian equities. The divergence between domestic and foreign inventors, which was observed in September and October 2024, has re-emerged.
A report by Motilal Oswal revealed a similar trend but for a different category—promoters. Promoters of private companies were also reducing their stakes in India to 46.9% in June 2025, which is 70 basis points on a quarter on quarter basis and 170 basis points on a year-on-year basis, the report found.
Hard data also suggest that Indian markets may not be in a very happy place. After sustained positive returns for three consecutive months, Nifty 50 returns declined nearly 3% in July 2025.
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