Global investment funds are actively reallocating capital away from peak technology themes toward Indian equities. Jefferies reports that foreign institutions have already directed $7.2 billion into Indian shares over a three-week window, helped by historically modest forward price-to-earnings multiples. Underlying economic strength is further evidenced by surging machinery imports alongside robust domestic mutual fund inflows. However, a growing local supply of new equities has continued to place a cap on headline index gains.
Key points
Global portfolio managers are rotating capital into India to escape deteriorating capital…: Global portfolio managers are rotating capital into India to escape deteriorating capital returns in the artificial intelligence sector.
Modest valuations, with the Nifty trading at 18.4 times forward earnings, enhance India's…: Modest valuations, with the Nifty trading at 18.4 times forward earnings, enhance India's appeal during its cyclical economic recovery.
Benchmark index gains remain restrained despite massive domestic mutual fund participatio…: Benchmark index gains remain restrained despite massive domestic mutual fund participation due to an expanding supply of equity.
Sources checked by our analysis pipeline: 1
As investors begin to question whether the AI frenzy is worth the money being poured into it, India could emerge as an attractive destination for global funds. Heavy AI spending by US technology companies and concerns over returns may encourage fund managers to scout for opportunities beyond technology stocks, according to Jefferies.
India could be among the biggest beneficiaries of this shift, the brokerage said in its latest GREED & fear investment strategy report.
"In emerging markets which GREED & fear knows more about, the obvious market to benefit from the reverse AI trade has been India."
The report said more fund managers were now looking at investment options outside AI stocks, as doubts grow over whether the AI boom can continue.
"From an investment standpoint, the now widespread view that the AI thematic has peaked is leading to a growing desire to look at non-AI trades on the part of portfolio managers."
Foreign investors bring money back to Dalal Street
Signs of this shift are already visible in foreign investment flows into Indian equities. Overseas investors have bought a…
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