India Outperforms Global Markets as AI Trade Falters: FIIs Buy Over ₹10,000 Crore in 5 Sessions Amid Heavy Selling in South Korea; Is Global Money Rotating to India?

Indian equity markets have staged a sharp recovery from their October lows, with the Nifty 50 climbing from an intraday low of 22,387 on October 26, 2026, to around 23,600 on November 3. The benchmark has recovered more than 1,200 points, or approximately 5.5%, in just six trading sessions, bringing the 23,700 mark within reach.

What makes this recovery particularly interesting is the changing performance of Indian equities relative to global markets. Over the past month, India has emerged as one of the stronger-performing major equity markets, while several markets that benefited from the artificial intelligence (AI) boom have come under pressure.

The reversal raises an important question. Is the recent rise in Indian equities merely a recovery ahead of Diwali, supported by easing crude oil prices and improving sentiment, or are global investors beginning to move money away from crowded AI-related investments towards markets such as India?

Indian Equities From Global Underperformer to Relative Outperformer

For much of 2026, Indian equities struggled to keep pace with markets such as South Korea, Taiwan and the US Nasdaq. Foreign investors were drawn towards markets with a strong presence in AI, semiconductor manufacturing and advanced technology.

South Korea's KOSPI and Taiwan's TAIEX were major beneficiaries of this trend, supported by companies such as Samsung Electronics, SK Hynix and Taiwan Semiconductor Manufacturing Company (TSMC). The Nasdaq also attracted substantial investor interest through its exposure to major AI and technology companies.

India, meanwhile, had relatively limited direct exposure to the global AI investment boom. With its benchmark indices dominated by financial services, consumption, automobiles and other domestic businesses, India was often viewed as an underweight market in portfolios seeking exposure to AI.

The surge in crude oil prices amid geopolitical tensions further affected sentiment towards Indian equities. As a major oil importer, India faced concerns over inflation, the rupee and corporate profitability. Persistent selling by Foreign Institutional Investors (FIIs) added to the pressure.

However, the relative performance has changed considerably in recent weeks.

The shift in relative performance has been particularly striking over the past month. While the Nifty 50 has gained 4.97%, major global indices have witnessed sharp declines. South Korea's KOSPI has plunged 19.35%, followed by Taiwan's TAIEX, which has fallen 12.90%. Japan's Nikkei 225 has declined 9.56%, while the US Nasdaq Composite and Hong Kong's Hang Seng have lost 7.45% and 2.09%, respectively.

Interestingly, the Nifty has relatively outperformed the KOSPI and Taiwan's benchmark. This marks a sharp reversal from the earlier trend, when Indian equities were underperforming these markets amid persistent foreign investor selling and strong global interest in AI and semiconductor-related stocks.

The reversal is particularly noteworthy because South Korea and Taiwan were among the biggest beneficiaries of the AI investment boom. Their recent corrections have coincided with growing concerns over technology valuations and the enormous capital expenditure being undertaken by major global technology companies.

Why Are Investors Reconsidering the AI Trade?

The recent correction in global technology stocks is not necessarily because demand for AI has weakened. Rather, investors are questioning how quickly the massive investments being made in AI infrastructure will translate into higher profits and cash flows.

Over the past few years, technology companies have committed substantial capital towards data centres, advanced chips, computing infrastructure and AI development. These investments helped support semiconductor demand and drove strong earnings growth across the technology supply chain.

However, the scale of spending has increased considerably. Investors are now paying greater attention to the cash required to fund this expansion, the potential pressure on margins and the time companies may need to recover their investments.
The distinction is important. A company can report strong revenue growth and still face selling pressure if investors believe its future growth is already reflected in its valuation or if capital expenditure is rising faster than expected returns.

That concern is now visible in the latest quarterly results of major US technology companies.

Big Tech Results Raise Questions Over AI Spending

Alphabet, the parent company of Google, reported a 25% YoY increase in revenue to $127.6 billion during the third quarter of 2026. Google Search revenue grew 12%, while search query growth reached its highest pace in five years.

Despite these strong operating numbers, the company's rising capital expenditure attracted attention.

Alphabet spent $51.4 billion on capital expenditure during the quarter, largely towards technical infrastructure supporting AI. Its free cash flow turned negative at $9.1 billion during the period.

The company continued to generate substantial operating cash flow, but the pace of investment meant that capital expenditure exceeded operating cash generation during the quarter.

A similar trend was visible at Meta Platforms, which reported negative free cash flow of $2.12 billion in the third quarter, compared with positive free cash flow of $10.63 billion in the corresponding period last year.

Amazon also reported a significant deterioration in free cash flow. Its trailing 12-month free cash flow stood at negative $42.4 billion, compared with negative $7.6 billion just three months earlier, largely due to increased infrastructure investment, particularly in AI.

These numbers do not indicate that AI investments will fail to generate returns. They do, however, explain why investors are becoming more selective about valuations and future profitability.

After a prolonged rally in AI-related stocks, even strong revenue and earnings growth may not be sufficient to support elevated valuations when investment requirements continue to rise.

South Korea and Taiwan Face Heavy Foreign Selling

The change in investor sentiment has been particularly visible in South Korea and Taiwan, two markets that benefited substantially from the global semiconductor boom.

Interestingly, the correction has come despite record quarterly earnings from leading semiconductor companies.

Samsung Electronics and SK Hynix reported exceptionally strong results for the third quarter, supported by demand for advanced memory chips used in AI infrastructure.

However, Samsung's plans for significantly higher capital expenditure and the absence of immediate clarity on its next shareholder-return programme added to investor concerns.

SK Hynix also reported record quarterly revenue and operating profit. The company disclosed long-term customer agreements covering more than half of its production capacity for 2027 and 2028.

Despite strong demand visibility, the market has become increasingly sensitive to the possibility that semiconductor earnings and valuations may have moved ahead of sustainable long-term growth.

The reversal is also reflected in foreign investor activity.

Reported institutional flow data showed foreign investors withdrawing approximately $31.78 billion from Taiwan during October 2026, while South Korea witnessed outflows of around $14.6 billion.

On a year-to-date basis, the reported cumulative foreign outflows reached $68.7 billion in Taiwan and $141.3 billion in South Korea.

Nevertheless, both markets remain among the stronger performers in 2026 despite the recent correction. This is an important distinction: the latest selling reflects a reassessment of valuations and future returns rather than evidence of a complete reversal in the underlying AI industry.

FIIs Return to India: ₹10,882 Crore Net Buying in Five Sessions

While foreign investors have been reducing exposure to some AI-driven markets, an interesting change has appeared in India's institutional flow data.

During the five trading sessions from October 27 to November 2, 2026, FIIs recorded net purchases of ₹10,881.84 crore in the Indian cash market.

In comparison, Domestic Institutional Investors (DIIs) recorded net purchases of just ₹108.02 crore during the same period.
Even more interesting is the consistency of foreign buying. FIIs were net buyers in four of the five trading sessions, with net purchases exceeding ₹3,000 crore on three separate days.

On October 27, FIIs bought shares worth a net ₹4,240.39 crore. This was followed by net purchases of ₹3,598.54 crore on October 30 and ₹3,114.68 crore on November 2.

This change deserves attention because Indian markets had previously relied heavily on domestic institutional buying to absorb persistent selling by foreign investors.

Over the latest five-session period, however, foreign investors have become the dominant net buyers.

The fact that FII buying has returned while several AI-heavy markets face selling pressure raises the possibility that global investors are reconsidering their regional allocations.

However, the two developments do not establish that money withdrawn from South Korea or Taiwan is being invested directly into India. Such a conclusion would require more detailed evidence on foreign fund allocations and portfolio holdings.

Why India Could Benefit from Global Portfolio Rotation

India's relatively limited direct exposure to the AI trade, which worked against it during the technology-led global rally, could now offer an advantage if investors continue reducing concentrated exposure to expensive AI-related stocks.

Unlike South Korea and Taiwan, where semiconductor companies account for a significant share of market performance, Indian benchmark indices have greater exposure to domestic consumption, banking, automobiles, infrastructure and other sectors driven primarily by the Indian economy.

For global investors seeking to diversify away from technology-heavy portfolios, this difference in sector composition becomes relevant.

There is also a valuation consideration. After months of relative underperformance and foreign selling, Indian equities may appear more attractive compared with markets where valuations had expanded rapidly on AI-related growth expectations.
At the same time, the recent decline in crude oil prices has provided some relief to Indian markets. Brent crude fell sharply in the previous session as hopes of progress in West Asian geopolitical negotiations improved sentiment.

Lower oil prices, if sustained, would ease some of the pressure on India's import bill, inflation expectations and corporate margins.

The recent market recovery could therefore be benefiting from a combination of improving domestic conditions and changing global investment preferences.

Still, India cannot be described as a defensive market merely because it has less exposure to AI. Foreign investors will continue to assess earnings growth, valuations, currency movements and geopolitical risks before increasing allocations.

Diwali Cheer or the Beginning of a Larger Global Rotation?

The Nifty's recovery of more than 1,200 points in six trading sessions, its recent outperformance against major global indices and renewed FII buying suggest that market sentiment has improved considerably.

However, it would be premature to conclude that a sustained global portfolio rotation towards India has already begun.
The recent rally has coincided with several developments, including easing crude oil prices, stronger domestic corporate earnings, recovery from oversold levels and the approach of the festive season.

At the same time, the pressure on AI-related stocks has created a different environment for global equity allocations. Investors who were previously willing to pay high valuations for exposure to AI growth are becoming more demanding about cash generation and returns on investment.

If this reassessment continues, markets with less concentrated technology exposure could attract greater attention.
For India, the more meaningful signal will be whether FII buying continues beyond the current five-session period and whether the market rally is supported by broader participation across sectors.

A sustained improvement in foreign flows, accompanied by stable crude oil prices and stronger corporate earnings, would provide better evidence of a lasting change in market direction.

For now, the evidence points to a notable shift in relative market performance. India, which was largely overlooked during the AI-led global rally, has started outperforming just as investors are questioning the returns from massive AI spending.

Whether this turns into a sustained rotation of global capital towards Indian equities or remains a short-lived recovery ahead of Diwali will depend largely on the persistence of foreign buying in the coming weeks.