As global AI markets waver, India’s broader economic recovery, tech investments, and changing investor sentiment are positioning the country as a new rallying point in the evolving AI-driven trade landscape.
India’s stock market, long overshadowed by Asia’s AI-heavy trading favourites, is starting to attract a different kind of attention. For much of 2025 and into 2026, investors shunned Indian equities because the market offered little direct exposure to the companies driving the artificial intelligence boom, unlike South Korea and Taiwan, where chipmakers and AI suppliers have dominated sentiment. But that pattern has begun to shift this summer, as concerns about the durability of AI spending have weighed on the region’s most concentrated tech markets and prompted some money to rotate towards India’s broader, less AI-dependent economy.
That shift has coincided with improving domestic conditions. India’s credit growth and fixed-asset investment have strengthened, pointing to firmer consumption and business activity, while first-quarter annualised real GDP growth of 7.8% has encouraged expectations that the World Bank and International Monetary Fund may have been too cautious in their forecasts for 2026. Foreign investors, who sold billions of dollars in Indian shares in the first half of the year, have recently turned buyers again, while inflows into Indian debt have also recovered after policy changes that reduced tax burdens for overseas investors. Analysts say the recovery could support the rupee, which has weakened against the dollar in 2026, while upgrades to earnings expectations in sectors including financials, telecommunications, consumer services and basic materials have added to the more constructive mood.
India is also becoming harder to classify as an outright AI outsider. Its huge, young population, widespread smartphone use and cheap data have made it one of the largest markets for AI consumption, with research from ADP Research Institute showing daily AI use among Indian employees well above the global average. At the same time, global technology groups are pouring money into the country’s infrastructure: Google, Microsoft and Amazon are among those planning major spending on servers, power systems and cooling, while Reliance Industries has set out a ₹10 trillion plan for AI computing infrastructure over seven years, and General Catalyst has pledged $5 billion across Indian technology sectors. Together, those commitments suggest India may be emerging not as an anti-AI play, but as a more diversified way to invest in the technology cycle.
Still, the rally is far from guaranteed. India remains exposed to the macroeconomic shocks that tend to hit large energy importers hardest. The renewed conflict involving Iran and the resulting spike in crude prices earlier this summer put pressure on the currency and revived concerns about imported inflation. Consumer prices rose 4.4% in June, still above the Reserve Bank of India’s medium-term target midpoint, and weak monsoon rains could intensify food inflation. That would complicate the central bank’s policy outlook and could even force a rate-hiking cycle if price pressures worsen.
For now, India looks less like a simple refuge from AI enthusiasm and more like a market benefiting from a rebalancing in global capital flows. Taiwan’s rise as an AI concentration trade, powered by the outsized influence of chip giant TSMC, and the recent pullback in South Korean tech shares have made investors more alert to valuation risks in crowded trades. Whether India can turn its recent gains into a lasting rerating will depend on how far those AI anxieties persist and how effectively the country navigates its own energy, inflation and geopolitical risks.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
