Overseas capital recorded a net sale of $2.1 billions in Indian stocks this month.

Oil prices soaring and global yields rising have prompted overseas investors to resume selling Indian assets, putting a dent in the recent trend of foreign capital returning to India. Data shows that global funds have made a net sale of $2.1 billion in Indian stocks this month, following two consecutive months of purchases. Indian sovereign bonds included in indices have also seen capital outflows, with foreign investors selling $1.1 billion so far this month—a pace on track to mark the largest monthly outflow since March this year. Previously, Indian sovereign bonds registered record capital inflows in June. Rising oil prices are weighing on the rupee and escalating inflation pressures, while the Indian economy’s heavy reliance on energy imports restricts policy flexibility. According to Gautam Chhaochharia, UBS’s Head of India Global Markets, oil prices will be a key factor in determining whether India sees another round of foreign capital outflows. UBS expects the Indian stock market to remain range-bound in the short term, as valuation levels, increased equity supply, and high oil prices could constrain further market upside.