{"id":17110,"date":"2025-11-10T14:30:23","date_gmt":"2025-11-10T09:00:23","guid":{"rendered":"https:\/\/trending.niftytrader.in\/?p=17110"},"modified":"2025-11-10T14:30:23","modified_gmt":"2025-11-10T09:00:23","slug":"global-ai-boom-diverts-foreign-investments-from-indian-equities-to-tech-heavy-markets","status":"publish","type":"post","link":"https:\/\/www.niftytrader.in\/markets\/global-ai-boom-diverts-foreign-investments-from-indian-equities-to-tech-heavy-markets\/","title":{"rendered":"Global AI Boom Diverts Foreign Investments from Indian Equities to Tech-Heavy Markets"},"content":{"rendered":"

How the Global AI Trade Pulled Billions Away from Indian Equities<\/p>\n

While global stock markets have soared on the back of the artificial intelligence (AI) boom, India has lagged behind, losing billions in foreign investment this year. As fund managers worldwide chase high returns in AI-linked markets such as Taiwan, South Korea, Japan, and the US, India is being viewed as an \u201canti-AI\u201d market \u2014 one that doesn\u2019t offer exposure to the world\u2019s fastest-growing technology trend.<\/p>\n

Foreign Institutional Investors<\/a> (FIIs) have already pulled out nearly \u20b92.5 lakh crore from Indian equities in 2025, marking one of the heaviest outflows in recent years. The shift underscores how the global AI rally has diverted liquidity from non-tech-heavy economies into those driving the next wave of innovation.<\/p>\n

India Labeled an \u201cAnti-AI\u201d Market by Global Investors<\/h2>\n

According to Ridham Desai, Managing Director at Morgan Stanley India, global \u201ctourist capital\u201d \u2014 investors chasing short-term thematic returns \u2014 has been firmly focused on AI. \u201cIndia does not really offer an AI trade,\u201d he said at the CNBC-TV18 Global Leadership Summit.<\/p>\n

Echoing this view, Neelkanth Mishra, Head of Global Research at Axis Capital, noted that the sentiment among foreign investors has turned negative. \u201cThey see India as an AI loser, while Taiwan and South Korea are AI winners because of companies like TSMC and Samsung, which directly benefit from the AI revolution,\u201d Mishra said.<\/p>\n

He added that global investors believe Indian IT firms and global capability centers (GCCs) might even suffer from the AI boom, as automation could reduce the demand for outsourcing and traditional IT services.<\/p>\n

Also Read : Luxury Real Estate Demand Set to Rise as Tech IPO Boom Fuels Buying Spree<\/a><\/p>\n

FIIs Rotate Out of India Amid Weak Market Sentiment<\/h2>\n

This perception has triggered a clear rotation of foreign capital from India into other emerging markets that have stronger AI exposure. As FIIs continue to sell, benchmark indices such as the Nifty 50 and Sensex have delivered muted returns.<\/p>\n

Despite steady domestic inflows from retail investors, India\u2019s overall equity performance has been subdued due to weak earnings growth and high valuations. In contrast, AI-driven markets have delivered double-digit returns, drawing in global liquidity that once favored India.<\/p>\n

According to market data, FIIs sold nearly \u20b92.5 lakh crore in the cash markets this year alone \u2014 a massive shift of funds towards AI-focused economies.<\/p>\n

AI Boom Propels Global Markets to Record Highs<\/h2>\n

The global AI rally has supercharged equity performance across major economies. China\u2019s AI companies have seen their combined market capitalization nearly double (96%) in a year, rising from $802 billion to $1.57 trillion.<\/p>\n

South Korea isn\u2019t far behind, with AI firms growing 94% year-on-year, led by semiconductor giants and data infrastructure providers. Taiwan\u2019s AI market cap expanded 47%, while Japan posted a 63% surge.<\/p>\n

In the US, home to leaders like Nvidia, Microsoft, and OpenAI, AI-linked companies added over 40% in value in the past year, reinforcing America\u2019s dominance in the global tech landscape.<\/p>\n

By comparison, the MSCI India Index has gained just 1% over the same period, while markets like Taiwan (+47%), South Korea (+50%), and China (+26%) have outperformed significantly.<\/p>\n

India\u2019s Valuations Stay High as AI Play Passes It By<\/h2>\n

On the emerging market front, investors have gravitated toward tech-heavy markets as India\u2019s valuations remain expensive relative to earnings momentum. In the September quarter alone, FIIs poured a record $15 billion into Taiwanese equities \u2014 the highest quarterly inflow ever recorded.<\/p>\n

\u201cPositioning in South Korea is at its strongest in more than a decade,\u201d said Desai, adding that the AI-led boom has created a new global order where capital prefers technological innovation over traditional consumption-driven growth stories.<\/p>\n

While India boasts a robust domestic economy, it lacks direct beneficiaries of the AI trend \u2014 no chipmakers, GPU giants, or large-scale AI software developers comparable to those in the US or East Asia.<\/p>\n

Is the Global AI Trade Losing Steam?<\/h2>\n

However, analysts are beginning to question whether the AI trade\u2019s red-hot rally can sustain itself. The Nasdaq Composite recently slipped 3%, while the Bloomberg AI Index fell 4% last week \u2014 the first notable correction in months.<\/p>\n

\u201cIf this trend persists without triggering panic, it could actually be healthy for markets,\u201d said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services. \u201cIt would preempt a potential AI bubble and set the stage for more balanced global capital allocation.\u201d<\/p>\n

He added that FIIs, especially hedge funds that exited India to chase AI gains, might soon reverse the trade. As AI valuations peak, investors may look for non-AI opportunities in stable, consumption-driven economies like India.<\/p>\n

Earnings Recovery Could Revive India\u2019s Equity Story<\/h2>\n

Despite foreign outflows, optimism remains for India\u2019s medium-term growth. The government\u2019s continued focus on infrastructure, manufacturing incentives, and consumer demand could revive corporate earnings. Analysts project that FY27 may mark a strong recovery phase for Indian equities as profitability improves and valuations stabilize.<\/p>\n

If global investors rotate out of overheated AI markets, India\u2019s steady fundamentals could once again attract long-term capital. \u201cIndia\u2019s story is not over \u2014 it\u2019s just being overshadowed temporarily by the AI narrative,\u201d said Mishra.<\/p>\n

Conclusion: India Awaits Its Next Big Theme<\/h2>\n

The global AI trade may have temporarily diverted funds away from Indian equities, but market experts believe this phase could be cyclical. As valuations in AI-heavy markets peak, India\u2019s domestic strength, consumption-led growth, and improving earnings could bring FIIs back to Dalal Street.<\/p>\n

For now, India\u2019s \u201canti-AI\u201d tag may keep it off the global radar \u2014 but as investors look beyond the AI frenzy, the world\u2019s fifth-largest economy could soon regain its shine in the global equity landscape.<\/p>\n