October net outflows hit ₹52bn, a sharp drop from September's ₹106bn. The total foreign exposure to index‑eligible notes slid to ₹3.57tn, the lowest level since June 17 and a 7% decline from the previous month.
The sell‑off is driven by a confluence of macro‑factors: Brent crude spiked 12% this month to near $115, while the 10‑year US Treasury yield climbed 25bps in the past two months. The RBI raised its policy rate by 0.25% earlier this month, hinting at further hikes, and the rupee slipped 1.5% against the dollar.
Despite the headwinds, long‑term sentiment remains positive. Norbert Ling, head of fixed‑income portfolio management at Invesco, said investors still see India as a constructive market, preferring to add duration when external pressures ease.
Looking ahead, the market will watch the RBI's next policy meeting and the government's bond issuance schedule. If the central bank signals a tightening stance, yields could stay elevated, while any new fiscal incentives could revive foreign demand.