India has received close to $1 billion per week through exchange-traded funds over the past four weeks, even as active foreign investor participation remains muted, according to a strategy report by Sanjeev Prasad, Co-Head – Institutional Equities, Kotak Institutional Equities.
The brokerage firm says emerging markets have seen a sharp rise in passive inflows after recent outperformance. As Kotak Institutional Equities states, “Our analysis of recent equity flows into EMs in recent weeks shows (1) a sharp surge in inflows and (2) a sharper increase in ETF flows.” The brokerage firm adds that these large inflows followed strong returns, noting that they show “the usual pattern of flows chasing performance.”
While foreign portfolio investor flows have turned positive in February after outflows in January, Kotak says the nature of these flows deserves attention.
Kotak Institutional Equities notes that total ETF inflows into India in 2026 so far is nearly $5 billion. At the same time, it cautions that net active foreign inflows remain negligible, indicating that the recent improvement is largely driven by passive funds.
Below is a detailed look at what Kotak Institutional Equities says about ETF flows and what the data in its report shows.
1) Kotak Institutional Equities on EM ETF inflows
Kotak Institutional Equities says in its report dated February 12, 2026, that emerging markets have seen a sharp increase in foreign ETF inflows in recent weeks. The brokerage firm presents weekly data showing a visible acceleration in flows from mid-January 2026. According to the data cited by Kotak, weekly ETF inflows into key emerging markets rose significantly during this period.
The firm states, “Our analysis of recent equity flows into EMs in recent weeks shows (1) a sharp surge in inflows and (2) a sharper increase in ETF flows.” Kotak Institutional Equities adds that these inflows have followed a period of strong performance in emerging markets.
Referring to performance trends, Kotak Institutional Equities says, “The large inflows into EM ETFs after a period of strong performance of EMs show the usual pattern of flows chasing performance.” The report presents comparative return data showing emerging markets outperforming developed markets in recent months.
Kotak Institutional Equities notes that the increase in ETF flows has been broad-based across major emerging markets, based on Emerging Portfolio Fund Research data cited in the report. The brokerage firm’s charts indicate that ETF inflows have risen sharply even as cash market foreign institutional investor flows were mixed.
2) Kotak Institutional Equities on India’s share of ETF flows
Kotak Institutional Equities says India has received its share of the recent surge in emerging market ETF flows. The report shows that India received around an average of $1 billion of foreign ETF inflows per week over the past four weeks.
The brokerage firm writes, “India has got its fair share of EM ETF flows, which resulted in FPI flows becoming positive after months of outflows.” According to the report, foreign portfolio investor equity flows stood at $1.9 billion in month-to-date February 2026, compared with outflows of $3.3 billion in January 2026.
Kotak Institutional Equities also notes that total ETF inflows into India in calendar year 2026 so far are almost $5 billion. However, it makes an important distinction between passive and active money. The report clearly states, “We believe net active FPI inflows into India continue to be negligible.”
The brokerage firm’s data shows that while ETF inflows have picked up sharply, overall cash market FII flows have been volatile in recent weeks. This suggests that the recent improvement in headline foreign inflows is largely driven by ETF activity rather than active stock-specific allocations, according to Kotak Institutional Equities.
3) Kotak Institutional Equities on the pattern of ETF flows
Kotak Institutional Equities links the surge in ETF inflows to recent market performance trends. The report includes a table showing emerging market returns across different time frames, indicating stronger returns in recent months compared with developed markets.
The brokerage firm says the pattern observed is consistent with past behaviour, stating that inflows have followed strong returns. In the report, Kotak Institutional Equities describes it as “the usual pattern of flows chasing performance.”
According to the data presented, emerging markets such as Brazil, Korea and Taiwan have delivered strong short-term returns. India’s returns have also improved in recent months, which Kotak Institutional Equities suggests has contributed to ETF allocations.
The firm’s weekly ETF flow chart for India shows a clear rise from November 2025 through early February 2026. The most recent weeks show flows above earlier levels, supporting Kotak Institutional Equities’ observation that there has been a sharp increase in ETF inflows.
4) Kotak Institutional Equities on gold ETF flows
Alongside equity ETFs, Kotak Institutional Equities highlights a significant surge in domestic gold ETF inflows. The report states, “Domestic gold ETFs saw a massive Rs 24,000 crore of inflow in January 2026, dwarfing the flows in previous months.”
Kotak Institutional Equities compares this with an average monthly inflow of Rs 3,600 crore in calendar year 2025 and Rs 7,700 crore in the fourth quarter of 2025. The January 2026 number is substantially higher than these averages.
The brokerage firm also notes that global investment demand for gold has increased. According to the report’s data sourced from the World Gold Council, ETF-related gold demand stood at 801 tons in calendar year 2025, while total investment demand reached 2,175 tons.
Kotak Institutional Equities says the surge in gold ETF inflows globally “implies (1) massive speculation in gold (along with silver) possibly; we are not sure if this is in lieu of the usual strong demand for physical gold or (2) loss of confidence of a section of households in the modern monetary system.” The report adds, “We assume it is the former, as the latter is too frightening to comprehend.”
Conclusion
Kotak strategy report shows that emerging markets have seen a sharp increase in ETF inflows in recent weeks, with India receiving nearly $1 billion per week over the past month.
At the same time, Kotak Institutional Equities said overall domestic gold ETFs in India recorded an unusually large Rs 24,000 crore inflow in January 2026, far above recent averages. The report states, “Domestic gold ETFs saw a massive Rs 24,000 crore of inflow in January 2026, dwarfing the flows in previous months,” referring to total industry-wide inflows and not any single fund house. By placing overall equity ETF flows alongside overall domestic gold ETF flows, Kotak Institutional Equities presents data showing how passive investment channels expanded sharply in early 2026.