Global AI trade shift could bring foreign flows back to Indian market: Experts

As global investors are looking beyond technology stocks to companies and sectors that stand to benefit from the artificial intelligence (AI) boom, Indian equities could regain foreign investor interest, market experts said in the latest episode of Fortune India Boardroom.

The experts said the AI-led rally has drawn capital towards markets such as the US, Taiwan and South Korea. However, Indian companies supplying power and equipment for AI infrastructure could also benefit as the investment cycle broadens.

At the Fortune India Boardroom, Kalpen Parekh, Managing Director and CEO of DSP Mutual Fund; Navneet Munot, Managing Director and CEO of HDFC Asset Management Company; and Vinay Jaising, CIO and Head of Equity Advisory at ASK Private Wealth, discussed the outlook for Indian equities amid a prolonged market correction, the direction of foreign portfolio investor (FPI) flows, valuations and earnings growth.

According to a recent report by Motilal Oswal Financial Services, investors remained focused on AI, Big Tech and semiconductor-led opportunities through much of calendar year 2026, favouring markets such as South Korea, Taiwan, Japan and the US. South Korea gained 72% in US dollar terms year-to-date, followed by Taiwan at 63%, Japan at 32% and the Nasdaq at 15%. Brazil also advanced 15%, supported by higher commodity prices.

India, by contrast, declined 19% in dollar terms, outperforming only Indonesia, which fell 26%, and Russia, down 23%, the report said.

In CY26, foreign institutional investors (FIIs) have remained net sellers, withdrawing over ₹4 lakh crore from the market, while domestic institutional investors (DIIs) have pumped in ₹6.8 lakh crore. In October so far, FIIs have recorded net sales of ₹39,779 crore, while DIIs have countered the outflows with net purchases of ₹40,355 crore.

AI trade could broaden beyond technology

Jaising of ASK Private Wealth said global investment flows have been gravitating towards markets benefiting directly from the AI boom, including the US, Taiwan and South Korea. However, he believes India could regain favour if global investors begin looking beyond AI-linked technology stocks.

“You’re seeing two markets in India. You’re seeing one market which is having some stress. And once the AI trade becomes a non-AI trade for the world, India will look a favourite,” Jaising said.

He believes that a broadening of the AI investment cycle could redirect investor attention towards other sectors and markets. As AI adoption drives investment in data centres and computing capacity, demand for electricity and related equipment is also growing. Indian companies supplying power and equipment for AI infrastructure could benefit if investors expand their focus beyond chipmakers and technology companies to the wider ecosystem supporting AI deployment.

Foreign flows depend on earnings and valuations

The return of foreign portfolio investor (FPI) flows will depend on several factors, including corporate earnings, relative valuations and the direction of global investment, say experts.

Navneet Munot said domestic investors have helped support the Indian market, with systematic investment plan (SIP) contributions and rising domestic ownership providing a structural cushion against volatility. He expects foreign flows to return over time as corporate earnings improve and Indian equities become more competitive on relative valuations.

The timing of such a return, however, remains uncertain. Global investors will continue to compare opportunities across markets, and India will need to offer an attractive combination of earnings growth and valuations to draw a larger share of international capital.

Kalpen Parekh said Indian equities are no longer uniformly expensive, with some market segments having undergone significant corrections. However, he cautioned against assuming that every stock that has fallen is now attractively valued.

He expects earnings growth to improve after a relatively subdued period, supported by activity in sectors such as automobiles, cement, power and housing. At the same time, investors need to be selective in segments where share prices have risen sharply without a corresponding improvement in earnings.

Munot said the correction in Indian equities, in both price and time, has made parts of the market more attractive for investors with a three- to five-year investment horizon, particularly in large-cap stocks.

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