Foreign investors have pulled out a massive ₹22,000 crore from Indian equities so far this month because of the uncertainty surrounding the outcome of the Lok Sabha elections and the outperformance by Chinese markets.

This followed a net outflow of over ₹8,700 crore in April on concerns over a tweak in India’s tax treaty with Mauritius and a sustained rise in US bond yields. Before that FPIs made a net investment of ₹35,098 crore in March and ₹1,539 crore in February.

Going forward, as clarity emerges on the election front, foreign portfolio investors (FPIs) are likely to buy in India as they cannot afford to miss the post-election results rally. The rally may begin even before the election results, V.K. Vijayakumar, chief investment strategist, at Geojit Financial, said.

“This heavy selling was triggered by the massive outperformance of Chinese stocks. The Hang Seng index, dominated by Chinese stocks (FPIs invest through Hong Kong since there are restrictions on investing through Shanghai) surged 7.66 per cent last month,” he said.

With the ongoing general elections, foreign investors at this point are wary to enter the Indian equity markets before the announcement of election results, Himanshu Srivastava, associate director — manager research, Morningstar Investment Research India, said.

FPIs invested ₹2,009 crore in the debt market during the period under review.

Before this outflow, foreign investors put in ₹13,602 crore in March, ₹22,419 crore in February, ₹19,836 crore in January. This inflow was driven by the upcoming inclusion of Indian government bonds in the JP Morgan Index.

“The long-term outlook for FPI flows into Indian debt is positive due to India’s inclusion in global bond indices. However, near-term flows are being impacted by global volatility. The trend will reverse once the interest rate outlook is clearer,” Vipul Bhowar, director of listed investments at Waterfield Advisors, said.