The NIFTY 50 fell 0.6% on Tuesday after foreign investors pulled $2.1 billion in equity sales this month, a sharp reversal from the two‑month buying spree that followed the June inflows.
The outflow comes on the heels of a 2‑year high in the 10‑year government bond yield, which rose 20 basis points to 6.12%—the highest in 24 months. Analysts at UBS Group AG argue that the surge in oil prices is the main factor pushing foreign capital out, and they now expect the index to trade in a narrow band until oil stabilises.
Meanwhile, the rupee, which has depreciated 1.3% against the dollar this quarter, is under further pressure from higher domestic energy costs. The Reserve Bank of India’s recent $133 billion diaspora‑deposit program temporarily bolstered reserves, but the central bank is selling dollars to support the currency, a move that has dampened investor appetite.
Despite the month‑to‑month selling, foreign funds have net‑bought $2.7 billion of Indian shares since July, marking the first quarterly inflow since the April‑June 2024 period. The sector‑wide MSCI India gauge remains a premium to its Asian peers, though earnings growth is expected to rise only 13% in 2027, the slowest among major East Asian markets.
Looking ahead, market watchers will monitor the RBI’s policy signals and the trajectory of global bond yields. If oil prices ease and yields remain stable, the NIFTY 50 could rebound, but a continued rally in US Treasury rates may keep volatility high for the foreseeable future.