When valuations are high the bears will use any negative news to push the market down. The slightly negative news, from the market perspective, came yesterday in the slightly hawkish comments of the RBI Governor. The good news that the economy is doing better-than-expected and a GDP growth projection of 7% and CPI inflation of 4.5% for FY 25 was ignored. The selling was aggravated with FIIs, too, running with the bears. There is a significant build up in the short position of FIIs. This normally happens along with the rise in the US 10-year bond yields which is now at 4.15%.
FII selling and bear onslaught are unlikely to take the market down significantly. There will be strong buying on dips. The sustained flows into mutual funds which are gathering momentum will enable the DIIs to buy aggressively. A good investment strategy now would be to buy the bluechips which FIIs are selling.
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