Indian Shares Diverge From the Technology Rout
India’s stock market is attracting renewed attention as investors retreat from artificial intelligence-related shares, with its limited exposure to AI hardware becoming a potential advantage. CNBC reported that the Nifty 50 had risen nearly 9% over the past month, outperforming markets in the United States, Japan, South Korea and Taiwan as technology stocks came under pressure.
On Friday, Nov. 6, Indian benchmark indexes traded higher while major Asian markets followed Wall Street’s overnight decline. Japan’s Nikkei 225 and Taiwan’s Taiex entered bear markets, South Korea’s Kospi fell further into bear-market territory, and the technology-heavy Nasdaq Composite moved into a correction overnight.
The relative strength represents a change for India, where foreign investors have maintained underweight positions for almost two years amid expensive valuations, weak earnings growth and a shortage of domestic AI leaders. Nevertheless, India’s principal benchmarks remained down for the year despite their recent recovery.
Foreign Buying Returns, With a Larger Reallocation Possible
Foreign investors bought more than $2.3 billion of Indian equities over the latest four days, reversing direction after net sales exceeding $31 billion through October, according to NSDL data cited by CNBC. Those purchases provide evidence of renewed interest, although they represent only a small reversal of the earlier withdrawals.
Rajiv Batra, JPMorgan’s head of Asia and co-head of global emerging markets equity strategy, told CNBC that foreign long-only investors moving from underweight to neutral positions in India could generate approximately $115 billion in net inflows. That figure describes a potential portfolio reallocation, rather than a forecast or committed investment.
Batra identified falling global oil prices, lower U.S. Treasury yields, improving Indian corporate earnings and the unwinding of AI positions as supportive factors. In his assessment, India has become a diversification option for investors reducing exposure to heavily owned AI trades.
Domestic Demand Offers a Different Market Profile
India’s benchmark indexes have little exposure to the AI hardware businesses that dominate markets such as South Korea and Taiwan. Instead, they are concentrated in financial services, consumer-related businesses, energy, industrials and other services. This composition gives investors a substantially different set of earnings drivers from those underpinning the AI trade.
Timothy Moe, Goldman Sachs’ chief Asia-Pacific equity strategist and co-head of Asia macro research, told CNBC’s “Squawk Box Asia” on Friday that India’s underlying economic fundamentals had strengthened. He expected markets with less AI exposure, including India and Australia, to perform relatively better, while identifying India’s domestic demand as an advantage over Australia.
Feroze Azeez, joint chief executive of Anand Rathi Wealth, also pointed to India’s scale, market liquidity and comparatively limited dependence on the AI cycle. His argument is that those characteristics make the country a practical alternative for global investors seeking to reduce AI-related holdings, not simply a market with fewer technology companies.
Earnings Recovery Strengthens the Case
Improving business results are adding substance to the renewed interest. JPMorgan data cited by CNBC showed earnings growth among listed Indian companies tracking above 20% for the September quarter. Over the preceding month, consensus earnings-per-share estimates increased by 0.5% for 2026 and 0.6% for 2027.
Indian equities had struggled since late 2024 as earnings growth slowed, but the source reported a reversal over the latest two quarters. Saurabh Mukherjea, founder and chief investment officer of Marcellus Investment Managers, described earnings growth during that period as particularly strong and said some high-quality large-cap companies were trading at their lowest valuations in a decade.
Hari Shyamsunder, vice president and senior institutional portfolio manager for India equities at Templeton Global Investments, said the Nifty’s forward price-to-earnings ratio was below its 10-year average. He added that MSCI India’s forward multiple in October was its lowest since 2020, suggesting that valuations had become less demanding relative to India’s own recent history.
Premium Valuations Keep the Hedge Thesis in Dispute
India nevertheless remains more expensive than several emerging-market alternatives. In a report published Monday, Bernstein rejected the idea that India should be classified as either an AI beneficiary or an anti-AI investment. It put India’s rolling 12-month forward price-to-earnings ratio at 18.6 times, compared with 9.3 times for China and 7.9 times for Brazil, and noted premiums over South Korea and Taiwan.
Mukherjea likewise argued that investors have simpler and cheaper ways to hedge AI exposure. Batra offered a different perspective, saying India had historically traded at an average of 1.4 times emerging-market valuations since 2007, supported by resilient earnings and domestically driven growth.
The durability of foreign buying remains uncertain. Shyamsunder said expensive crude, rupee weakness and attractive growth opportunities elsewhere had previously reduced India’s appeal. Sustained oil-price declines and weaker growth outside India could alter that balance, he said, but continued foreign inflows would depend on Indian companies maintaining earnings growth over the next several quarters.
Source: CNBC