India is drawing renewed interest from global fund managers seeking to diversify equity portfolios as concerns grow that the global artificial intelligence rally may be losing momentum. According to Bloomberg, several major asset managers see Indian stocks as well positioned to benefit if investors begin rotating away from tech-heavy markets that have been driven by a narrow group of AI winners.
Aberdeen Group expects Indian equities to rebound next year, while Principal Asset Management and Eastspring Investments argue that India’s relatively low correlation with the global AI trade offers a useful hedge against markets dominated by technology stocks. Similar views have been expressed by strategists at HSBC Holdings and Jefferies Financial Group, who see India as a way to reduce concentration risk at a time when valuations elsewhere remain stretched.
After underperforming global peers this year, Indian stock valuations have eased back toward their five-year average, restoring some appeal to a market long supported by domestic consumption rather than export-led technology cycles. Equity gains in India continue to be driven largely by banks, consumer-facing companies and services firms, giving investors exposure to broad-based economic growth rather than a single theme such as artificial intelligence.
Raj Singh, a multi-asset manager at Principal Asset Management, said India could serve as a strong portfolio diversifier in 2026, particularly if the AI investment cycle pauses. He pointed to low correlations with other major markets, supportive government policies, tax cuts, labour law reforms, ample domestic liquidity and signs of stabilisation in corporate earnings as factors underpinning the investment case.
Stock pickers are also highlighting opportunities within India’s large-cap universe. Jefferies has identified Axis Bank, Bharti Airtel and TVS Motor as preferred names, arguing that Indian equities are likely to outperform if global enthusiasm for AI-related investments begins to peak. The brokerage sees India’s earnings profile as more resilient in a scenario where technology valuations come under pressure.
The contrast with other major markets is becoming clearer. While global technology giants such as Amazon and Microsoft have committed a combined $52 billion in fresh investments in India, much of it aimed at building AI infrastructure, the country lacks major pure-play AI companies comparable to US chipmaker Nvidia. India also has limited exposure to chip design, manufacturing and equipment, and early AI initiatives at companies such as Tata Consultancy Services have so far attracted muted investor interest.
By comparison, China’s equity market offers more direct AI exposure through companies such as Tencent and Alibaba, as well as listed chipmakers including Cambricon Technologies and Moore Threads. While this gives investors leverage to any upside from artificial intelligence, it also ties returns more closely to the sector’s volatility and to policy shifts in Beijing, making diversification more challenging.
Eastspring Investments portfolio manager Christina Woon said India’s appeal lies in its domestic growth drivers and relatively reasonable earnings expectations compared with many global markets. She noted that investors can gain exposure to economic expansion without taking on excessive risk linked to a single technology trend.
Supportive macroeconomic conditions are also strengthening the case for Indian equities. The central bank has cut interest rates, economic growth reached 8.2 per cent in the latest quarter, and expectations are building that a trade deal with the United States could be finalised soon. These factors are helping to offset concerns about global slowdown and volatile capital flows.
Jerry Goh, investment director for Asian equities at Aberdeen, said India could surprise investors after a subdued performance this year. He noted that his firm is selectively positioning in areas where valuations appear more attractive, reflecting a cautious but optimistic stance on the market’s prospects as global investors reassess the sustainability of the AI-driven rally.
