Synopsis: While investors are becoming more cautious towards AI stocks that are too crowded, India is becoming an “anti-AI” diversification play supported by solid domestic growth, fair valuations, and a low correlation with AI-heavy markets.
Global investors are starting to rethink their very large bets on artificial intelligence (AI) stocks, especially in the US, as the valuations have been rising steeply over the last year. The recent fluctuation in the share prices of major AI names such as Nvidia, AMD, and other global technology leaders has increased the risk of being too heavily concentrated in these stocks.
As earnings find it difficult to follow the lofty expectations, even small disappointments result in a steep sell-off, which is causing fund managers to seek opportunities outside of pure AI plays. Meanwhile, the Indian equity markets are getting more and more attention as a diversification or “anti-AI” play.
Several global asset managers, according to a Bloomberg report, consider India a low-correlation alternative to markets that are heavy on AI, like the US and parts of China. India, unlike these markets, does not have a large number of pure-play AI stocks that dominate the performance of the index, and thus, it is less exposed to the unwinding of the global AI trade.
Fund managers emphasize that the Indian market narrative is mainly based on the country’s domestic growth factors rather than the technology hype. Consumption, financial services, infrastructure spending, manufacturing, and policy reforms are the main pillars that continue to support earnings growth. This makes India an attractive portfolio hedge in case global investors decide to take a break from or reduce their exposure to AI-centric themes.
Another factor that is supportive of this is the macroeconomic outlook. India is forecasted to provide GDP growth of close to 8.2 percent, which will be fuelled by strong domestic demand, tax reforms, and stable earnings growth. Economists also foresee a more accommodative stance of the central bank as inflation eases, which could, in turn, give further impetus to economic activity and corporate earnings.
The market has been performing in a mixed manner in 2025 so far. While the Nifty 50 has been able to gain close to 10 percent, the broader markets have been lagging, with the midcaps showing a small increase and the smallcaps recording a decline.
Despite this, global fund managers like Aberdeen Group, Principal Asset Management, and Eastspring Investments are of the opinion that Indian equities could come back strongly in 2026 as the valuations appear to be more attractive when compared to the global peers.
Investors are also of the view that, whereas global technology leaders such as Amazon and Microsoft are going all out for AI infrastructure in India, the local stock market is yet to factor this in very aggressively. Not even the largest IT companies in India have witnessed an over-the-top investor enthusiasm for their AI initiatives, which further solidifies the perception of India as a market where fundamentals prevail rather than hype.
In conclusion, as the risks associated with heavily investing in AI-laden stocks are escalating, worldwide investors are turning more and more to the Indian market, which is not only a growth market led by domestic demand but also a market that could profit from any global rotation away from the technology sector that is concentrated in a few hands. This, in turn, could imply better market performance for the coming years.
Written by Satyajeet Mukherjee
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