The net investment by foreign institutional investors (FIIs) in stock market during 2011-12 was the lowest in the last three years at Rs 47,935 crore.
FIIs made a net investment of Rs 47,935 crore in the equity market during the fiscal ended March 31, 2012, which was way below the figure of Rs 1.1 lakh crore in 2010-11 and Rs 96,857 crore during 2009-10, according to the SEBI data.
In 2008-09 financial year, foreign fund houses had offloaded shares worth Rs 47,706 crore.
Fears of a global economic slowdown and domestic troubles with inflation, interest rates, lack of reforms and the falling rupee all collaborated to make the foreign investors cautious in 2011-12, experts said.
Destimoney Securities' Managing Director and CEO Sudip Bandyopadhyay said, "Eurozone worries have pushed the Indian market into risk aversion mode and other emerging countries are performing better than India, so FIIs are staying away from our market."
However, the January-March period of the fiscal saw robust inflows. Out of the total net investment of Rs 47,935 crore, Rs 43,951 crore came during the last quarter of FY12.
Market analysts attributed strong FII inflows in January-March to signs of a reversal in the Reserve Bank of India's (RBI) monetary policy and the subsequent impact of improved liquidity position .
They expect the positive trend to continue further, given that the liquidity conditions remain strong.
"FIIs have been infusing money into the Indian market due to change in RBI's monetary policy that has added liquidity to the system. This liquidity will help in growth of the country," Wellindia executive director Hemant Mamtani said.
"Indian market will continue to witness inflows in the whole year, if the liquidity conditions remain strong," he added.
During the past fiscal, foreign fund houses infused Rs 49,053 in the debt market this takes the collective net investments by FIIs in the stocks and bonds to Rs 93,725 crore.
Experts also said that outflow was seen in most of the sectors, but interest rate sensitive segments like auto, banking and realty were among the worst hit.
FIIs, the main drivers of the markets, turned negative on equity here last fiscal. The stock market barometer Sensex has plunged 2,041 points or 10 per cent in the fiscal 2011-12.
The index finished at 17,404.20 points on March 30.
Earlier in January, the government had announced its decision to allow Qualified Foreign Investors (QFIs) to directly invest in the Indian equity market.
The move comes against the backdrop of significant foreign capital outflows from the domestic equity market in recent times, which has resulted in rupee volatility.
In August last year, the government allowed foreign investors to directly invest up to $13 billion in equity and debt schemes of mutual funds.