New Delhi, April 7 -- Foreign institutional investor (FII) flows into India may be closer to a reversal than the market currently believes, according to DSP Mutual Fund, which said the present combination of weak macro sentiment, stretched external pressures and more reasonable valuations may actually be creating a contrarian opportunity for global investors.

"A shaky macro backdrop. That is precisely why this may be a strong contra signal," said the brokerage. It further highlighted that historically, the biggest foreign inflows into India have come when valuations were cheap or at least reasonable. Not when optimism was highest.

The brokerage's view comes at a time when foreign selling has remained intense. In March, foreign investors...