India faces tough challenge to stem outflows

INDIA’S capital markets have faced intense selling pressure in recent weeks due to a combination of factors, including global macroeconomic headwinds, monetary tightening and a massive exodus of foreign capital.

While its central bank had raised its interest rates last week – the first in four years – the move is unlikely to be enough to bring foreign investors back in a meaningful way, with a weakening rupee, rising hedging costs and unfavourable global market conditions continuing to undermine returns from the country’s debt and equity markets.