Major global fund managers are increasing exposure to Indian stocks, particularly in IT and consumer sectors, as a strategic hedge against rising risks tied to artificial intelligence. The move reflects growing concerns over AI-driven market distortions and a search for resilient emerging market assets.
- Global funds added $4.2 billion to Indian equities in Q4 2025, a 63% YoY increase
- Indian IT stocks like INFY.NS and TCS.NS trade at forward P/E ratios below 18
- Reliance Industries (RELIANCE.NS) and ITC (ITC.NS) are key beneficiaries of trend
- European and Middle Eastern investors now hold 18% of emerging market assets in India
- Nifty 50 rose 14% in Q4 2025, outperforming major global indices
- Investors view Indian equities as a diversification tool against AI-related market volatility
A growing number of international asset allocators are redirecting capital toward Indian equities, with information technology and consumer goods firms emerging as top picks. Companies like Infosys (INFY.NS), Tata Consultancy Services (TCS.NS), Reliance Industries (RELIANCE.NS), and ITC (ITC.NS) are seeing heightened interest as investors seek stable, high-growth assets outside AI-dominated U.S. markets. The shift is driven by concerns over overvaluation in AI-related equities and the potential for abrupt corrections in technology-heavy indices. According to recent portfolio flows, Indian equities attracted over $4.2 billion in net inflows during the fourth quarter of 2025, marking a 63% increase compared to the same period the previous year. This trend is particularly pronounced among European and Middle Eastern institutional investors, who now hold 18% of their emerging market exposure in Indian equities—up from 11% in early 2025. The relative undervaluation of Indian IT firms, combined with strong earnings visibility and robust dividend yields, makes them attractive counterweights to the speculative nature of AI-driven growth stocks. TCS.NS and INFY.NS trade at forward P/E ratios below 18, significantly lower than the 28x average for major U.S. AI-focused peers. Additionally, Reliance Industries' diversified business model provides a rare blend of digital infrastructure exposure and traditional consumer resilience. Market impact is already evident: the Nifty 50 index rose 14% in Q4 2025, outperforming major global benchmarks. Broader sectoral gains have led to increased analyst upgrades and new fund launches focused exclusively on Indian equities. This capital rotation is likely to continue as global investors reassess risk exposure in the wake of rapid AI adoption and regulatory uncertainty.