The difference between the equity yields (1/PE) and bond yields for an FII was too good to ignore even when the currency risks are factored. With bond yields spiking globally, risk-reward for an FII to buy Indian equity is at its worst in many years. For this to change, Indian market valuations have to temper down (can happen driven by strong earnings growth, or by way of a correction, or both) or bond yields in countries like the US. Interest rates across the economy are set based on the target range and if that is breached, it can impact the Fed’s objectives. Given that the repo transactions are backed by high-quality collateral, it is expected to track the Fed Funds rate very closely.

Source: The Hindu December 21, 2025 12:52 UTC