Image Source: The Economic Times
Kotak Institutional Equities has flagged a sharp surge in inflows into emerging market equities and gold ETFs, warning of potential macroeconomic implications for India. Rising gold imports and speculative ETF flows could strain the current account deficit, liquidity, and balance of payments if trends reverse.
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Kotak has highlighted that early 2026 has witnessed an unusual spike in investor flows into both emerging market equities and domestic gold ETFs. While India has been a major beneficiary of nearly $1 billion per week in ETF inflows, the parallel surge in gold ETF investments—touching Rs 24,000 crore in January—signals speculative positioning that may complicate macroeconomic stability.
Key Highlights
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Large inflows into gold ETFs coupled with strong physical gold imports may challenge India’s current account deficit management
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Any reversal of foreign portfolio inflows into outflows could weigh heavily on India’s balance of payments
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High current account deficits combined with capital outflows risk complicating reserve money creation, domestic liquidity, and deposit growth
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India remains a top beneficiary of EM ETF flows, but the speculative tilt raises concerns about sustainability and volatility
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Kotak analysts emphasize that investor behavior reflects a search for safety and short-term opportunities, which could amplify risks if global conditions shift
Sources: Moneycontrol, The Financial Express, Business Standard
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