Key facts
- Foreign investors have pulled an estimated $3.2 billion from Indian assets in September.
- The outflows are attributed to a renewed rally in oil prices, with Brent Crude trading above $100 per barrel.
- This is the highest pace of outflows since March, when geopolitical events triggered a massive exodus from Asian assets.
- India's assets had seen inflows from April to July, including record inflows in June.
- The rising oil prices are pressuring the Indian rupee, which has been a poor performer in Asia this quarter.
- Higher oil prices, inflation, and rising global yields are contributing to renewed investor outflows from Indian assets.
Foreign investors have pulled an estimated $3.2 billion from Indian stocks and bonds in September, driven by a resurgence in oil prices above $100 per barrel for Brent Crude. This marks the highest pace of outflows since March, a period characterized by geopolitical tensions and an oil supply crunch in Asia that led to a significant exodus from Asian assets.
Following substantial outflows in March, Indian assets experienced a period of inflows from April through July, with June recording record levels. These June inflows coincided with the reopening of the Strait of Hormuz and a decline in oil prices. However, the renewed surge in oil prices in September, amid ongoing hostilities in the Middle East and tightening global fuel markets, has prompted foreign investors to sell off approximately $2.1 billion worth of Indian equities and $1.1 billion in index-eligible sovereign bonds.
The rising oil prices are exerting renewed pressure on the Indian rupee, which has been one of Asia's worst-performing currencies in the third quarter due to high oil costs and persistent economic challenges. Higher oil prices, coupled with inflation and increasing global yields, are triggering these outflows from Indian assets.