Indian equity markets are experiencing a fundamental shift in their support structure. Domestic institutional investors, powered by mutual fund and systematic investment plan inflows, have replaced foreign institutional investors as the primary market driver. This transition has created a new market dynamic where corrections are shallower and recoveries faster than historical patterns. The steady, consistent nature of domestic capital flows provides a cushion against global shocks and foreign sell-offs that previously triggered sharp declines. However, analysts note an important caveat: market stability is increasingly driven by liquidity flows rather than underlying earnings strength. While portfolio management strategies show strong outperformance with measured risk, the broader market appears supported more by continuous buying pressure than by fundamental valuations.
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