Foreign investors continued their relentless selling in Indian equity markets in August, shedding shares worth Rs 21,201 crore due to the unwinding of the yen carry trade, recession fears in the US and ongoing geopolitical conflicts.

This came after an inflow of Rs 32,365 crore in July and Rs 26,565 crore in June, according to depository data.

Foreign portfolio investors (FPIs) invested during these two months expecting sustained economic growth, continued reform measures, a better-than-expected earnings season and political stability.

Prior to this, FPIs had withdrawn Rs 25,586 crore in May due to poll jitters and over Rs 8,700 crore in April due to concerns over a change in the India-Mauritius tax treaty and a sustained rise in US bond yields.

Data from depository banks shows that FPIs have invested Rs 14,364 crore in equities so far this year. The FPI outflows observed in August were mainly due to a combination of global and domestic factors. “Globally, concerns over the unwinding of the yen carry trade, a possible global recession, slowing economic growth and ongoing geopolitical conflicts have led to market volatility and risk aversion,” said Vipul Bhowar, director of listed investments at Waterfield Advisors. The outflow was triggered by the unwinding of the yen carry trade after the Bank of Japan raised interest rates to 0.25%.

On the domestic front, some FPIs that were net buyers in June and July may have decided to take profits after a strong rally in previous quarters.