Domestic mutual funds are running down cash just as foreign investors return to Indian equities, creating a potential two-engine liquidity boost for a market seeking its next leg higher. The mutual fund industry’s cash ratio dropped to a multi-year low of 4% in June, while foreign institutional investors (FIIs) have pumped Rs 15,559 crore into Indian stocks so far in July. The FII reversal follows four consecutive months of selling in which they pulled out a staggering Rs 2,60,925 crore.
The simultaneous shift is significant because domestic funds appear increasingly willing to deploy capital after the recent market rally, while foreign investors are returning from extremely light positioning. Whether those flows can sustain a fresh bull run will depend on their durability and whether corporate earnings catch up with the recovery in stock prices.
