India-Focused Offshore Funds: A Year of Sharp Shifts and Global Crosscurrents

India-focused offshore funds and ETFs saw a year of sharp swings, marked by alternating periods of inflows and outflows. Morningstar’s Offshore Fund Spy – September 2025 highlights that the category recorded USD 3.7 billion in net outflows year-to-date, even as overall assets held steady at around USD 96 billion. Strong inflows in the June quarter were quickly reversed by sizeable outflows by September, reflecting rapidly shifting global sentiment.

These movements were driven largely by global pressures, higher US tariffs, rising global yields, rupee volatility, and a cautious stance toward emerging markets. Despite this, India’s robust domestic fundamentals and steady policy environment helped temper sentiment. Offshore ETFs remained relatively resilient, seeing milder outflows as investors gravitated toward liquid, low-cost vehicles in volatile markets. 

Morningstar’s latest report breaks down these evolving trends, what’s driving foreign participation, and why India continues to attract long-term interest despite near-term uncertainty.