As caution grows over an investment bubble in artificial intelligence (AI), global funds are turning their attention back to India as an alternative. Institutions seeking to avoid volatility in global stock markets, where tech stocks have a higher weighting, are focusing on India's low correlation with AI and its solid consumer base.
Bloomberg News reported on the 14th that global asset manager Aberdeen Group expects an Indian stock market rebound next year, and Principal Asset Management and Eastspring Investments assessed that India's market has a low correlation with AI-related transactions and can serve as a hedge. HSBC and Jefferies also offered similar outlooks. Another attraction is that as this year's AI fever has cooled, valuations in India's stock market have returned to the five-year average.
Gains in India's stock market are being led by banks, consumer goods, and services. The structure that does not rely on specific AI beneficiary stocks is seen as providing diversification for global funds. Raj Singh, a manager at asset manager Principal AMC, said, "If AI transactions pause to catch their breath, funds are likely to flow into India," and added, "India has structural growth drivers such as tax cuts, labor law reforms, and expanded domestic liquidity."
Investment bank Jefferies highlighted Axis Bank, Bharti Airtel, and TVS Motor as promising picks. It also said that if global investors are mindful of the peak of the AI investment cycle, India's market could deliver relative outperformance.
However, India lacks core AI corporations like U.S. Nvidia, and investment in the semiconductor design and manufacturing ecosystem is limited. Early AI projects by Tata Consultancy Services (TCS), India's largest IT company, also failed to gain much traction in the market. By contrast, China includes many listed AI and semiconductor companies such as Tencent, Alibaba, and Cambricon, offering growth opportunities, though policy risk is considered high.
Amazon and Microsoft announced $52 billion (about 7.3 trillion won) in investments in India last week, with a substantial portion to be used to expand AI infrastructure. The fact that India's growth rate is holding in the 8% range and that the likelihood of concluding trade talks with the United States is rising are also supporting the market.
As global funds move to reshape portfolios to reduce AI risk, India is reemerging as a key investment destination. Jerry Goh, head of Asia equities at Aberdeen, said, "Unlike this year's sluggish performance, India could deliver notable results next year," adding, "We are selectively investing in areas where value appeal has grown."