"An increase in (government securities) yields in the domestic market has seen FPIs pulling out money from the Indian debt markets, whereas outlflow of money from equity market is a function of rise in global yields and deterioration in macroeconomic fundamentals of Indian economy largely due to rising crude prices. "Besides, FPIs have also booked profit ahead of the upcoming state election," Rakesh Tarway, head of research at Reliance Securities.According to Ajay Bodke, CEO at Prabhudas Lilladher, there has been a heightened risk aversion as markets are watching with caution the outcome of key developments related to US-Iran and Karnataka elections "Firstly, whether a headstrong Trump tears the Iran nuclear accord despite fervent pleas from other signatories. Withdrawal by the US and reimposition of tough economic sanctions on Iran has the potential to send global crude oil prices soaring as Iran is one of the largest suppliers of crude," he said.This would impact all the oil importing economies including India and adversely affect it's CAD, fiscal deficit , imported inflation and create headwinds for economic growth, he added. "Secondly, an adverse outcome for the BJP in Karnataka polls may embolden the opposition's shrill criticism of government's economic policies creating roadblocks for future reforms. Conversely, a favourable outcome for the BJP will strengthen its resolve to carry forward the momentum in the next round of assembly polls in October 18," Bodke pointed out.

Source: Economic Times May 06, 2018 05:48 UTC