Siddharth Maurya, (M.D and founder) of Vibhavangal Anukulakara

A decline in interest rates decreases the returns on Indian debt instruments, such as bonds and fixed deposits, resulting in less appreciation by foreign institutional investors. Conversely, countries with higher interest payments become much more attractive. Often this leads to what is referred to as capital outflow, or the process of investors withdrawing funds from Indian markets and moving them elsewhere. The withdrawal of foreign funds leads to volatility in the equity and debt markets, and also reduces the overall liquidity in the Indian markets.