Participants are also awaiting measures from the government to boost growth and revive consumer sentiment, experts added.
FPIs, however, invested a net Rs 2,096.38 crore in the debt securities during the period.
During the last week, the Sensex gained 463.69 points or 1.24 per cent.
However, analysts said the trend may reverse if the government addresses the tax concerns of overseas investors.
In the budget last month, Sitharaman proposed to hike taxes on those earning more than 20 million rupees annually.
Separately, media said government was considering reducing tax on long-term capital gains introduced three years ago.
The country's reserve position with the fund also declined by USD 15.8 million to USD 3.534 billion, the apex bank said.
Investors have moved to debt; net inflows amounted to USD 1.3 billion as of July 1-29.
India’s benchmark 10-year bond yield was down 10 bps at 6.43 per cent after falling to 6.42 per cent.
FPIs have been on a selling spree since the announcement of super-rich tax, said Morningstar's Himanshu Srivastava.