Investors Reassess India As AI-Led Bets Unwind Globally

India’s equity markets are beginning to draw renewed attention from global investors as enthusiasm around artificial intelligence-linked assets cools in other regions. According to a Reuters report, fund managers say India’s growth profile, driven largely by domestic demand, is increasingly being viewed as insulated from the risks associated with AI-heavy capital expenditure cycles.

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Foreign investors have returned to Indian equities in February after a three-month period of net selling. Reuters data shows net foreign purchases of around $1.5 billion so far this month, following an outflow of about $21 billion last year.

Domestic Demand At Centre Of Growth Narrative

Market participants cited by Reuters pointed to India’s consumption-led growth model as a key differentiator. Unlike economies heavily exposed to technology exports or AI infrastructure spending, India’s expansion is supported by internal demand, demographic trends and policy stability.

“Once that AI theme plays out and investors start looking again for long-term growth, there is no story like India,” Prateek Agrawal, chief executive of Motilal Oswal Asset Management Company, told Reuters. He added that newer emerging sectors are expected to drive future growth, though some of this is yet to be fully reflected in benchmark indices.

Relative Market Performance

Indian equities have also shown relative resilience compared with global technology markets. Reuters data shows the Nifty 50 has declined by less than 1% since late October, a period during which the Nasdaq index fell by over 5% after peaking.

At the same time, the Indian rupee has recovered from record lows following the announcement of a trade agreement between India and the United States, further supporting investor sentiment.

“There’s enough excitement - demographics, consumption, policy-making — all of those tailwinds are in India’s favour,” Rahul Saraf, head of investment banking at Citi India, said at the Reuters Global Markets Forum.

Valuations And Risks

India’s economic momentum remains strong, with the economy projected to grow 7.4% in the fiscal year ending March 2026, according to official estimates cited by Reuters.

Growth is expected to moderate slightly thereafter but remain among the highest globally.

Valuations, however, remain a point of discussion. The Nifty 50 trades at around 22 times forward earnings, above its long-term average and higher than broader emerging market benchmarks.

Some market participants told Reuters that these levels are justified by consistent growth, though others cautioned that any slowdown could test investor confidence.

Despite recent pressure on IT services stocks amid a global technology sell-off, India continues to attract capital through steady domestic inflows and a strong pipeline of public listings, reinforcing its position as one of the world’s most active equity markets.