The year 2016 is set to go down as the only year after 2008 when overseas investors have taken money out of Indian markets. Foreign portfolio investors (FPIs) have pulled out $3 billion from debt and equity markets put together so far this year.

Since 1999, when FPIs started investing in the domestic debt market, overseas investors have been investing between $750 million and $42 billion each year, with the exception of 2008. In the aftermath of the global financial crisis of 2008, FPIs had pulled out around $9.5 billion from the Indian market. In 2008, the sell-off was in the equity ...