This market capitulation, characterized by extreme panic selling, has led to a rapid decline in prices, undermining investor confidence.

Emerging markets have also felt the impact, with foreign institutional investors (FIIs) selling equities worth approximately $2.9 billion in India and $488 million in Indonesia in the last two weeks.

Despite the recent challenges, analysts suggest that FIIs may return to India as both the US and China face economic slowdowns amid the ongoing trade war.

VK Vijayakumar from Geojit Investments remains optimistic, predicting that India could still achieve a 6% growth in FY26, potentially attracting FPI investments once market conditions stabilize.

In contrast, the US and China have seen sharp expansions in domestic flows, with the US markets recording $37.6 billion in inflows over 16 weeks and China $27 billion over six months.

In the US, foreign-domiciled funds saw a significant $10 billion outflow, reversing earlier inflows, while Japan recorded $424 million in outflows following previous gains.

Taiwan and South Korea have faced ongoing FII redemptions for the past several weeks, with Taiwan seeing outflows of $68.6 million and South Korea experiencing $6.4 billion month-to-date.

Global junk bonds faced their largest redemptions since the onset of the Covid-19 pandemic, totaling $20 billion.

Following the official tariff announcement on April 3, 2025, India experienced a notable $352 million outflow this week, adding to a total of $603 million in outflows over the past 12 weeks.

Elara Capital indicates that the 'tariff trade' narrative may have reached its conclusion after six months of volatility, suggesting a shift in market dynamics.

Concerns regarding US tariffs have triggered significant fluctuations in global markets, prompting foreign investors to withdraw funds from nearly all regions except Mexico and Hong Kong.

FII outflows from emerging markets began in October 2024 due to concerns over US tariffs, continuing until February 2025 and contributing to increased market volatility.