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

The renewed rally in oil prices above $100 per barrel Brent has prompted foreign investors to pull money out of India’s stock and bond markets at the highest pace since March, when the start of the Iran war and the oil supply crunch in Asia launched a massive exodus from Asian assets.

Following the largest outflows this year in March, India’s assets returned to booking inflows in April, May, June, and July, with a record of inflows in June, according to data from Clearing Corporation of India Limited compiled by Bloomberg.

The record inflows in June coincided with the three-week reopening of the Strait of Hormuz and the decline in oil prices.

But as oil surged again in September amid renewed hostilities and still no pathway to peace, foreign investors are estimated to have sold off $2.1 billion worth of Indian stocks and $1.1 billion in index-eligible sovereign bonds this month, the data showed.

The rise in oil prices is pressuring the Indian currency, the rupee, again, which has been one of the worst performers in Asia in the third quarter amid surging oil prices and persistent economic pressures resulting from these.

Higher oil prices and inflation, and rising global yields, are triggering renewed investor outflows from Indian assets.

“Oil will be the biggest factor determining whether India sees renewed foreign outflows,” Gautam Chhaochharia, head of global markets India at UBS Group, told Bloomberg.

High oil prices are set to limit any meaningful gains in Indian stocks in the coming weeks and months, according to the bank.

Oil prices rose in Asian trade on Wednesday, with Brent Crude at $103 per barrel and WTI Crude at $89 per barrel. Both crude oil benchmarks were set to post a monthly gain again as uncertainty about Middle East oil flows remains high and global fuel markets tighten further.

By Tsvetana Paraskova for Oilprice.com

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