For months, investors touted Indian equities as a place to hide if the global artificial-intelligence trade unraveled. This week, that thesis is playing out.
The NSE Nifty 50 Index rose Friday, defying a selloff that left every other major Asian market in the red. As investors slashed exposure to AI stocks on fears of tighter regulation following a Democratic sweep in the US midterm elections, Indian equities headed for their biggest weekly gain in more than five years.
It’s a striking reversal for the $5.3 trillion market in less than two weeks. India’s relative lack of exposure to the AI trade had helped make its stocks among Asia’s worst performers as global funds headed for the exits. Now, as the once-high-flying trade unravels, that weakness has quickly turned into a blessing. Foreign investors are returning, helping narrow year-to-date losses, while plunging oil prices and an improving earnings outlook lift the market’s appeal.
There’s “very high possibility that India market will outperform other Asia markets in the short team,” said Charlie Hong, founder and chief investment officer at LOGOS Asset Management. “The trend will sustain for the medium term only if earnings continue to recover.”
Overseas investors have plowed a net $1.9 billion into local shares this week through Wednesday, while provisional data for Thursday showed a net inflow of $1.6 billion. They’re also slashing their bearish wagers — short positions on index futures on the National Stock Exchange (NSE) fell by more than 100,000 contracts this week.