The Indian stock market is emerging as an attractive hedge as investors seek refuge from a brutal sell-off in the artificial intelligence trade, making it a strong contender for global capital.
As sentiment around AI sours, foreign investors, who have been underweight on the Indian market for nearly two years due to high valuations, subdued earnings growth and lack of local AI tech champions, could start returning.
"If these foreign long only investor groups were to neutralize their underweight in Indian equities, this could translate into potential net inflows of around $115 billion," Rajiv Batra, head of Asia and co-head of global emerging markets equity strategy at JPMorgan, told CNBC.
He said that multiple factors are currently stacked in favor of the country, such as falling global oil prices, a drop in U.S. Treasury yields, a recovery in earnings growth of Indian companies and unwinding of global AI trade.
"India has emerged as an 'AI hedge' for portfolios trimming or diversifying out of crowded AI trades," Batra said.