Overseas investors have pulled out nearly Rs 17,000 crore from the capital markets in the first two weeks of the month amid continued taxation worries.

During January to April, investments by Foreign Portfolio Investors (FPIs) totalled Rs 94,241 crore, but month-on-month analysis shows the fund flows are witnessing a declining trend.

FPI investments in January this year stood at Rs 33,688 crore, before dropping to Rs 24,564 crore (February), Rs 20,723 crore (March) and Rs 15,266 crore (April).

Things got worse in May as FPIs have withdrawn an estimated Rs 16,723 crore ($2.6 billion) so far this month, according to the latest data from depositories.

This included an outflow of Rs 7,635 crore from the equities and another Rs 9,088 crore from the debt market.

The huge sell-off comes on apprehension that the government would impose a 20 per cent Minimum Alternate Tax (MAT) on profits earned by overseas investors.

Expressing concerns over FPIs facing MAT demand, global rating agency Fitch has said the controversy may prompt FPIs to think twice before investing in India.

The Income-Tax Department has already issued notices to 68 FIIs totaling Rs 602 crore over non-payment of MAT.

Some foreign investors have gone to court, while the government has decided to set up a high-level committee to resolve the issue.

Since January 2015, overseas investors have invested Rs 77,585 crore in the Indian capital markets (equity and debt).