For two months, global investors couldn't get out of Indian stocks fast enough.
They just hit the brakes - and turned around.
Last week, foreign funds bought a net of almost $900 million worth of Indian shares, according to Bloomberg data. That breaks an eight-week streak of selling.
The trigger is simple: oil. India imports more than 85% of its crude. When oil prices spike, the country's import bill swells, the rupee gets hammered, and foreign investors head for the exits. Middle East tensions sent oil surging earlier this year. Now those tensions are easing, and oil is coming back down. Suddenly, India looks investable again.
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The government didn't just wait for oil to cooperate.
India scrapped taxes on certain debt investments and loosened ownership restrictions - moves designed to pull foreign money back in. It's working. Foreign investors bought $1.5 billion of Indian sovereign bonds last week alone, per Central Depository Services India data.
The rupee has stabilized too. That matters because a weak rupee eats into foreign investors' returns when they convert profits back to dollars. A steadier currency makes the math work better.
One good week doesn't erase the damage.
Overseas investors are still net sellers of more than $29 billion in Indian stocks this year. That's on pace to beat the annual record for outflows. The selling wasn't just a blip - it was historic. One week of buying is a signal, not a turnaround.
Think of it like a bathtub that's been draining for two months. Someone just turned the tap back on, but the tub is still mostly empty. The question now is whether the tap stays on.
Oil prices are still the main character here. If Middle East tensions flare again and crude jumps back toward triple digits, the selling probably resumes. If oil stays calm, India's math keeps improving.
The bond market is worth watching too. That $1.5 billion in sovereign bond buying suggests foreign investors see India's debt as a safer entry point than its stocks - at least for now.
One week of buying doesn't fix two months of selling. But it's the first time the arrow has pointed up since spring.
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