Nothing sedates rationality like large doses of effortless money,” Warren Buffett wrote in his letter to Berkshire Hathaway shareholders in 2000.
Whether it’s effortless or not can be debated, but Indian mutual funds have been certainly receiving large doses of money in their equity funds. As a result, they have pumped in about ₹1.2 trillion ($17 billion) in each of the last two calendar years into the equity markets. While this has been generally hailed, since domestic institutions are finally a strong counterbalancing force against volatile foreign flows, there are some counterproductive effects to worry about as well.
