India's next major market catalyst could come from foreign institutional investor (FII) flows, according to Geoffrey Dennis, an independent emerging markets commentator.

Speaking to CNBC-TV18, Dennis said emerging markets remain reasonably placed despite rising US bond yields and continued uncertainty surrounding the US Federal Reserve's policy path. Higher US Treasury yields are often watched closely by emerging market investors, as they can affect the relative attractiveness of assets in developing economies compared with the United States. When US yields rise, dollar-denominated assets can become relatively more appealing, which investors monitor as a factor influencing where global capital is allocated.

Dennis said he remains positive on Korea and Taiwan, a view he tied to the ongoing rally in artificial intelligence and technology-related stocks. The two markets are home to major semiconductor and hardware manufacturers that are widely regarded as key participants in the global AI supply chain.

At the same time, he cautioned that he expects slower gains ahead for emerging markets, accompanied by higher volatility.

For India, Dennis pointed to FII money as the potential next catalyst for the market. Foreign institutional investors — a category that includes overseas mutual funds, pension funds and other institutional money managers registered to invest in Indian markets — are a significant participant in Indian equities, and their buying and selling flows are tracked closely as an indicator of market direction. Sustained FII buying has historically coincided with periods of strength in Indian benchmark indices, while extended stretches of outflows have often accompanied market corrections, making the direction of these flows a widely followed signal for near-term market sentiment.

The comments come as investors continue to assess the outlook for US interest rates and the implications for global capital flows into emerging markets. (CNNBC-TV18)