Indian government bonds topped the performance of emerging markets in Asia this week, while the rupee regained its attractiveness among emerging market currencies, supported by the decline in oil prices and US Treasury bond yields, and the shift of global investors’ attention away from markets related to the artificial intelligence sector, which eased pressures on the Indian currency and reduced market bets on a sharp increase in interest rates by the Reserve Bank of India.
This shift came in the wake of the Democrats' victory in the US midterm elections, and the accompanying decline in oil prices and US Treasury bond yields, as well as growing concerns about the sustainability of massive spending on artificial intelligence infrastructure and the high valuations of technology companies.
The yield on the benchmark Indian 10-year bond, due in 2036, which carries an interest rate of 6.94 percent, recorded 7.1973 percent by 11:40 am local time, rising by 2.5 basis points during the day, but it fell by about 22 basis points during the week, heading for its best weekly performance since April, according to “Reuters”.
In contrast, the yield on 10-year US Treasury bonds has declined by about 10 basis points since the beginning of the week, which has enhanced the attractiveness of Indian debt with high yields. Indian bonds also outperformed their counterparts in Indonesia, the Philippines, China, Malaysia and Thailand.
Foreign investors returned to the Indian debt market, buying bonds worth approximately 52 billion rupees ($552.28 million), their largest net weekly purchases since July.
Rohit Agarwal, co-founder of Bequest Capital, a family wealth management company in Dubai, said: “Currency stability, oil prices and global interest rate expectations are still major factors, and we believe that India is receiving increasing interest from global bond investors.”
Indian stocks and the rupee also benefited from the shift in global market sentiment. The rupee rose by about 1 percent to 94.10 against the dollar, while the benchmark Nifty 50 index rose by 6.7 percent during the week, reaching 24,612 points.
The Indian rupee is regaining its attractiveness among emerging market currencies after spending most of the year under pressure, with the decline in global investment momentum in artificial intelligence stocks, which brought markets that had not received sufficient attention back into the circle of investors’ attention.
During most of 2026, global investors favored tech-heavy markets, particularly in the United States and North Asia, to enhance their exposure to the AI sector. This investment concentration negatively affected India, given its stock market's limited exposure to the semiconductor sector and artificial intelligence infrastructure supply chains, which put pressure on stocks and the rupee.
But this equation is beginning to show initial signs of change. Concerns about the sustainability of huge spending on artificial intelligence infrastructure and rising company valuations were already challenging the rise in technology stocks, before the Democratic Party achieved a sweeping victory in the US midterm elections.
Investors fear that the new American political landscape will lead to increased oversight of artificial intelligence companies and increased scrutiny of the expansion of data centers.
In this context, the “Fear” index, which measures Wall Street’s volatility, jumped on Thursday, while the “Nasdaq” index fell by 5.5 percent, recording its largest daily decline since what was known as “Liberation Day” in April 2025.
Analysts at JP Morgan, Goldman Sachs, and BlackRock have highlighted in recent weeks the relative attractiveness of the Indian market, if global investors tend to diversify their investments away from markets with high exposure to artificial intelligence, pointing to the diversity of the Indian stock market and its reliance on local growth engines that provide an investment alternative.
There are signs that this transformation is beginning to materialize, as foreign investors have intensified their purchases of Indian stocks, approaching $3 billion during the current week, including purchases worth $1.6 billion on Thursday alone, which is the largest in one day in about six years.
The return of foreign capital inflows into Indian stocks would provide important support to the rupee, especially after a long period of exits.
The rupee was among the best-performing currencies in Asia during the week, and also topped the region's currencies on Friday, at a time when most other Asian currencies declined.
The Indian currency rose to its highest level in six months at 94.10 against the dollar, bucking the general trend in the region, after it had recorded a record low level of 96.96 in May.
Radhika Rao, chief economist and executive director at DBS Bank, said that the relative stability of the rupee enhances returns calculated in dollars for foreign investors, while the decline in oil prices constitutes a “remarkable” supportive factor for India, the third largest energy importer in the world.
Brent crude fell by about 20 percent this week, heading towards recording the largest weekly decline since April 2020, amid expectations that the US President, weakened by the election results, will seek to end the conflict with Iran.
In the derivatives market, the one-year overnight interest rate swap (OIS) rate fell by 32 basis points during the week to 6.40 percent, the two-year rate fell by 34 basis points to 6.40 percent, while the five-year rate fell by 37 basis points to 6.49 percent.
After the decline in oil prices, market estimates of interest rate increases by the Reserve Bank of India fell to about 50-75 basis points, compared to previous expectations of an increase of 125 basis points, according to a trader in a private sector bank.
The decline in oil has eased pressures on India's inflation expectations, weakening the justification for pre-emptively tightening monetary policy. Low crude prices also reduce pressure on the country's trade balance and public finances.
Alok Singh, head of treasury at CSB Bank in Mumbai, said that the possibility of reaching an agreement between Iran and the United States has strengthened the sentiment of the Indian markets, adding that any additional decline in the 10-year bond yield will remain dependent on reaching a settlement of the Iranian crisis and a decline in crude oil prices below $90 a barrel.
Asian stocks fell sharply, Friday, in the wake of a broad wave of selling on Wall Street that affected shares of companies related to artificial intelligence.
The Japanese benchmark Nikkei 225 index fell by 6.1 percent to 57,332.92 points, falling below the level of 60,000 points for the first time in about six months. Shares of Japanese technology companies were among the most affected, led by SoftBank Group and Advantest.
In Australia, the Standard & Poor's ASX 200 index fell by 0.5 percent to 9,020.80 points, while the South Korean KOSPI index fell by 6.3 percent to 5,042.65 points, with a sharp decline in the shares of Samsung Electronics and SK Hynix.
The Hang Seng Index in Hong Kong also fell by 0.9 percent to 24,567.97 points, and the Shanghai Composite Index fell by 1.1 percent to 3,648.94 points.
Stock markets around the world are under pressure due to the continued decline in the shares of companies that have benefited from the artificial intelligence boom. These stocks have witnessed fluctuations for months, amid fears that the construction of artificial intelligence data centers will slow due to the significant rise in the cost of borrowing. Critics also believe that artificial intelligence stock valuations have risen to exaggerated levels, and that the market is witnessing a bubble.
Toyota Motor Company shares fell sharply, after the Japanese automaker announced profits below expectations the previous day.
In Thursday's trading on Wall Street, the Standard & Poor's 500 index fell by 4.4 percent, recording its worst daily performance since the tariffs announced by US President Donald Trump in April 2025, under the name “Liberation Day,” caused turmoil in global markets.
The selling wave erased more than all of the gains achieved by the US stock market the previous day, when it recorded its best performance in three months.
The Dow Jones Industrial Average fell 1,833 points, or 3.4 percent, while the Nasdaq Composite Index fell by 5.5 percent. The index, which includes a large number of technology stocks and companies related to artificial intelligence, is 11.9 percent lower than the record high it recorded last month. Investors call a stock decline of more than 10 percent a “correction.”
The US midterm elections, which were held on Tuesday, increased the challenges facing the sector. Broad Democratic victories across the country have raised the possibility that governments might impose a temporary moratorium on building more data centers. Voters of all political affiliations are concerned about artificial intelligence and object to increases in electricity bills resulting from data centers.
Any slowdown in the construction of artificial intelligence data centers would lead to a decline in purchases of chips designated for these technologies, as well as a decline in demand for electricity and other products and services captured by the artificial intelligence boom, which has become a major driver of the growth of the American economy.
The stock of Nvidia, which quickly became the most prominent face of the artificial intelligence boom, fell by 9.3 percent, and had the largest negative impact by a wide margin on the Standard & Poor's 500 index. The stock is currently declining by 2.6 percent since the beginning of the year, after annual gains amounting to about 39 percent, 171 percent, and 239 percent during the past three years, respectively.
Advanced Micro Devices shares also fell by 17.3 percent, and Core Wave shares, which specializes in renting access to artificial intelligence chips to customers via cloud computing, fell by 9.8 percent. Shares of GE Vernova, which contributes to providing energy for data centers, fell by 7.5 percent.
The pressure on investors increased due to the large weight of shares of artificial intelligence chip companies on Wall Street, after they became among the largest companies listed on the market. For example, a 1 percent move in Nvidia's stock affects the Standard & Poor's 500 index to a greater extent than the impact of a move in the stock of almost any other American company at the same rate.
In the long term, stock prices tend to move in accordance with trends in corporate profits and interest rates, as the influence of these two factors goes beyond the influence of the identity of the party that controls the decision-making centers in Washington.
