Foreign Investors Pull $3.2 Billion From Indian Markets as Oil Rally Returns

Foreign investors have been pulling $3.2 billion from Indian markets due to the resurgence of oil prices above $100 per barrel. This trend of outflows has reached its highest pace since March, coinciding with the start of the Iran war and the oil supply crunch in Asia. Prior to this, India had seen inflows in April, May, June, and July, reaching a record in June.

However, this month, investors sold off $2.1 billion in Indian stocks and $1.1 billion in sovereign bonds, following the recent surge in oil prices as a result of renewed hostilities. This trend is affecting the Indian currency, the rupee, which has been performing poorly in Asia due to the surge in oil prices and ongoing economic pressures.

Gautam Chhaochharia, head of global markets at UBS Group, noted that oil prices will significantly impact whether India sees renewed foreign outflows. The recent rise in oil prices has led to higher inflation and global yields, prompting investors to reconsider their positions in Indian assets. As of Wednesday, Brent Crude was trading at $103 per barrel, while WTI Crude reached $89 per barrel, both expected to post another monthly gain due to uncertainty surrounding Middle East oil flows and tightening global fuel markets.