The big emerging market worry of rising bond yields in the U.S. is not impacting India since the foreign institutional investors have been forced to reduce their selling, according to VK Vijayakumar, chief investment strategist at Geojit Financial Services Ltd.
The FIIs are being completely neutralised by the sustained buying by the domestic institutional investors as well as retail exuberance, Vijayakumar said. “The main trigger for this divergent trend in equity and debt is the high valuation in the Indian equity market and the rising bond yields in the U.S.”
Net investment into equity and equity-linked schemes in January surged 28% over the previous month to Rs 21,780 crore, the highest since March 2022, according to data released by the Association of Mutual Funds in India.
The mutual funds industry across debt and equity schemes recorded an inflow of Rs 1.23 lakh crore during the month against an outflow of Rs 40,684 crore in December. Contribution of the systematic investment plans to the mutual funds industry stood at a record Rs 18,838 crore in January, compared to Rs 17,610 crore in December.
“This resilient domestic buying is providing the main support to the ongoing rally in the market, and the strong performance of the economy and improving corporate earnings are solid fundamental support to the market,” Vijayakumar said.