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Higher bond yields as well as a potential US Fed rate hike sparked a global risk-off sentiment, leading to elevated FII outflows in India, said Motilal Oswal Financial Services.

According to the brokerage house, $13.5 billion in FIIs' outflows have taken place in the secondary markets since October 2021.

"Domestic equities have also borne the brunt of rich valuations after a relentless rally post the bottom in March 2020," the brokerage house said.

"While the Nifty-50 has corrected just 8 per cent from its October 2021 peak thus far, it is hiding the stress in the broader markets."

Besides, it cited concerns around the cost of "equities going up" has taken a brutal toll on high growth stocks belonging to the Tech domain, with recently listed digital IPOs coming off 25-50 per cent off their recent highs.

"The spike in crude oil prices to $90 per barrel has further soured sentiment in India."

Furthermore, it said that with ultra-easy monetary policy set to reverse the course globally and in India, "we expect the equity markets to remain volatile as they adjust to the higher cost of the capital environment".

"This, in our view, would keep testing the expensive valuation multiples enjoyed by a section of the market in question. This is truer for companies that lack profit or cash flow visibility in the near future - as rising interest rates would suppress the valuations of companies where positive cash flows have been modelled only into the distant future."