Indian Equities Outperform Broader Asian Markets Amid Global AI Selloff

The NSE Nifty 50 Index rose as much as 1.2% on Friday, defying a market selloff that left every other major Asian market in the red. The movement highlights a shift in investor sentiment, as markets previously weighed down by India's limited exposure to the global artificial-intelligence trade now find themselves insulated from the sector's recent downturn.

Investors had previously reduced exposure to AI stocks following fears of tighter regulation prompted by a Democratic sweep in US midterm elections. As that trade unwound, Indian equities headed for their largest weekly gain in more than five years. This marks a sharp reversal for the $5.3 trillion market, turning previous relative weakness into an advantage and drawing back global funds.

Overseas investors plowed a net $1.9 billion into local shares this week through Wednesday, with provisional data for Thursday showing an additional net inflow of $1.6 billion. Market participants also trimmed bearish wagers, as short positions on index futures on the National Stock Exchange of India fell by more than 100,000 contracts over the week.

The sudden influx of capital contributed to gains for the Indian rupee, which had neared a record low last month. The currency climbed up to 0.6% to 93.8687 against the dollar, marking its strongest level since April. The dollar-rupee rate also broke below its 200-day moving average for the first time since 2025.

Despite the recent inflows, structural challenges remain. Indian shares are still on track for their first annual losses in 11 years, the rupee remains among Asia's weaker currencies, and total foreign outflows for the year sit at a record high. Energy costs remain elevated, and earnings growth continues to lag behind peers in North Asia.

However, plunging oil prices and improving corporate earnings are offering additional tailwinds. Profit growth at roughly two-thirds of BSE 100 companies that have reported results was the fastest in at least five quarters, beating analyst estimates according to Citigroup Inc.

"The recent divergence of Indian equities from broader Asian markets demonstrates how shifting global macroeconomic trends can rapidly alter capital flows. While the current inflows and improving corporate earnings provide a welcome boost, stakeholders must remain cautious of broader structural deficits and annual performance trends. Sustainable market outperformance in the medium term will ultimately rely on consistent earnings recovery rather than temporary shifts in global sector allocations." — Dr. Shishir Gupta, Founder & CEO, StartupLanes