Sector rotation to sustain India rally missing, says Adrian Mowat

Adrian Mowat pointed out that the markets may have overextended on the expectations of rate cuts after the Fed’s comments in December

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26 Aug, 2025 12:21

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Veteran investor Adrian Mowat says sectoral rotation is important for markets to maintain a rally, as rally from different sectors show a broad and healthy market. In a conversation with CNBC-TV18, the emerging market equity strategist said he is concerned that such a rally is not seen in Indian markets.

“To maintain the powerful rally the Indian markets have enjoyed it needs sector rotation. We are not getting the rotation. This made me concerned that this rally does not have the legs that a broad-based rally would have,” he said.

Mowat pointed out that the markets may have overextended on the expectations of rate cuts after the Fed’s comments in December. “We are seeing little bit of correction after a powerful rally," Mowat added.

Commenting on HDFC Bank’s results which disappointed the markets, Mowat said the bank’s negative performance will have an impact on the rest of the financials in India and the sector rotation to financials. Mowat reasoned the recent moves in US and Europe were driven by sector rotation towards financials and the lack of that in India is concerning.

On January 17, HDFC Bank stock fell eight percent which affected the Nifty as the stock has 13 percent weightage in the index. The Nifty Bank also fell four percent, making it the worse performing index of the day.

Meanwhile, banks won’t feel the pressure to cut interest rates as there is a disinflation trend and that will result in a jump in real income, Mowat said. Mowat also added that the dollar is going to strengthen as markets expected too much rate cuts from Fed’s commentary in December and now people are dialing back on the expectations. US Federal Reserve governor Christopher Waller said pivot in monetary policy will take more time than expected, which soured the sentiments and will result in the strengthening of the dollar.