Similarly, outflows from Bric (Brazil, Russia, India, China) funds have remained at about $3 billion during the past four weeks.

EPFR, which tracks investment flows into and out of mutual funds, has stated in a press release, “Outflows from emerging markets equity funds slowed in late November as risk aversion dropped in the face of continued interest rate cuts, new stimulus measures and the impending arrival of a new US administration."

But the lack of fresh outflows from India funds for about a month isn’t mirrored in the activity of foreign institutional investors (FIIs) in India.

Although FII selling had slowed considerably in the first few trading sessions of November, the last 10 trading sessions have seen outflows of about Rs4,300 crore in the cash segment. Net long positions taken in the futures segment during the same period amounted to less than Rs100 crore, which essentially means that net sales averaged nearly Rs420 crore a day.

Of course, FII purchases and sales needn’t always reflect the trend seen in global mutual funds that invest in India. While redemptions in these mutual funds leads to sales in the Indian market, it must also be noted that EPFR data doesn’t capture all FIIs. So even if the funds aren’t selling, there could be other registered FIIs such as pension funds and proprietary desks of banks that are selling in the market.

Still, since fund flow activity suggests a drop in risk aversion, at least India funds may not sell heavily in the Indian markets for the time being. So far this year, Indian markets have been paralysed by the FII selling of Rs55,500 crore in the cash segment, which was only partially offset by long positions worth Rs17,640 crore in the futures segment.

Many analysts have been predicting a bear market rally. The yield on three-month US treasury bills ended last week at 0.02%, which means there’s a lot of money sitting on the sidelines that could fuel that rally.

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