Soaring crude oil prices, and relentless progress in AI have taken centre stage as key issues in almost all discourses in the global village.
However, Motilal Oswal Group's Chairman and Co-Founder Raamdeo Agrawal pointed to a potentially bigger challenge for the Indian markets.
In an interview with NDTV Profit, Agrawal admitted that while oil's rally is a point of concern for India, the country has found a sounder footing compared to past crisis. On the other hand, the sharp rise in global bond yields, he said, has rattled him.
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The 10-year US Treasury yield rose to the highest in almost two decades on Tuesday, by as much as four basis points to 5.02%.
In this backdrop, the Motilal Oswal MD underlined, "the pace at which the bond yield is rising in US is definitely sign of some trouble," adding while the pressure could eventually lead to some action, including a reduction in the US fiscal deficit, but a rise in yields across varied maturity points to a deeper issue.
“It's not only that. I mean, the bond yields long tenor, mid-tenor 10-year, 30-year. They go up. It's a much deeper thing,” he said.
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According to Agrawal, two major forces are coming together strain global bonds: government deficits and a synchronised corporate capital expenditure boom.
“I think the CapEx boom, I mean the synchronised CapEx boom all over the world where even the guys who are the most profitable, highest cash flow machine, all the hyperscalers, they are the biggest borrowers. In fact, they have become net cash flow negative,” he said.
Agrawal said the pace of the rise in yields was particularly unsettling and that he cannot anticipate what will happen, adding that the pace was not in the normal range.
Further, he emphasised that a global bond sell-off could eventually trickle down to Indian yields as well. “If the global bond sell-off, I don't think we can stay here. Our yields will also spike,” he said.
India's 10-year government bond yield rose 6 basis points after the Reserve Bank of India announced a bond sale to drain excess cash from the banking system. The India 2031 bond yield rose 13 basis points following the RBI's cash-drain move, according to the latest data.
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AI Is Not The End Of IT Services
Addressing the impact of artificial intelligence on IT services company, Raamdeo said the market might be re-assessing its original stance, pointing to Accenture's share-price movement as an indicator.
“Everything is overdone. That Accenture price is actually driving it. In US, Accenture went down from 400 to almost 118. And from 118 nowadays, 195. I think yesterday it shot up by 3%, 4%.”
He said the reassessment did not necessarily mean technology-services companies would disappear because of AI.
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