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Adrian Mowat Predicts No Near-Term FII Return to India Amid High US Bond Yields
- •Investor Adrian Mowat expects foreign institutional investors will not return to Indian markets in the near term due to rising global bond yields and persistent equity weakness.
- •Higher shipping costs and fuel prices driven by geopolitical tensions will continue putting pressure on India, while RBI interventions offering short-term relief on the rupee.
- •US bond yields are expected to remain elevated in the near term, with a decline likely only as higher borrowing costs slow economic growth over the next year.
- •Mowat expects artificial intelligence capital expenditure to moderate but believes the broader equity market is not in bubble territory, noting falling valuations and semiconductor capacity constraints.
Key Questions Answered
Adrian Mowat does not expect foreign institutional investors to return to India soon because of rising global bond yields, persistent weakness in Indian equities, and the impact of the Iran war on oil prices and shipping costs. He notes that while the RBI is using its FX reserves to support the rupee, this offers only short-term relief.
Adrian Mowat expects US bond yields to remain elevated in the short term due to a strong US economy running above potential, large fiscal deficits, and a higher term premium. He believes a decline will only happen as rising borrowing costs eventually slow down economic growth 12 months from now.
Adrian Mowat believes that while AI capital expenditure will moderate, the broader equity market is not in a bubble. He points to falling valuations across the US equity market—such as Nvidia trading at 17 times earnings down from 34—alongside persistent capacity constraints in the semiconductor industry.
