After a big loss in the global AI rally, Indian stocks are again attracting the attention of investors willing to ride out the market’s latest turmoil.
With benchmark gauges making the artificial intelligence splash from Asia to the US, the NSE Nifty 50 index is becoming a safe haven of sorts for global investors. In the first half of the year, it rose 1% or more on nearly one-third of the days – less than the MSCI Emerging Markets index and barely more than the S&P 500 index.
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The AI shortage in India remained a hindrance for most of the year as investors turned to markets like South Korea and Taiwan that had delivered stellar returns. But with growing concerns over the sustainability of that trade, interest in India is slowly coming back. In June, the Nifty 50 outperformed the MSCI Emerging Markets index since November, while foreign outflows were the lowest in four months.
“India’s peace depends on one thing: it getting out of the AI business,” said Maxence Wiseau, chief investment officer at Archevium Capital in Dubai. His company is neutral on the market and uses it as a diversifier, he said. “India acts as AI hedge inside EM complex.”
Indian shares remain one of the world’s worst performers this year, but the situation has started to change as the rupee has stabilized after hitting a record low and oil refiners and airlines have fallen as tensions in the Middle East have eased. Inflation concerns eased and India’s economic growth prospects brightened, according to a government report in late June.
Also, market players are becoming more excited about the upcoming earnings season, which Tata Consultancy Services Ltd. begins on Thursday.
“The fall in commodity prices has changed the macro outlook for India almost overnight,” said Sandeep Sabharwal, founder of research house Asksandipsabharwal.com in Mumbai. “Low commodity prices, improving capital flows and stable interest rates create an environment where earnings upgrades are more likely to outweigh downgrades in the coming quarters.”
In a note to clients, Morgan Stanley analysts including Ridham Desai wrote last month that India has become a “very large macro asset class.” He said less volatile inflation data in recent years supports equity valuations and shifts the market to defensive growth that can absorb global shocks better than before. Over the past decade, the Nifty 50 has almost tripled, generating annual gains of more than 10% in six different years.
The benchmark indexes recorded 38 sessions with a move of 1% or more in either direction in the first six months of 2026, compared with 59 for MSCI’s emerging market and Asian gauges and 32 for the S&P 500. South Korea’s Kospi index was off the charts with 79 days of fluctuations of at least 1% in 2026 – or two-thirds of the days.
Meanwhile, India’s NSE Volatility Index fell for the third consecutive month in June, slipping below its one-year average and hitting its lowest level since February on Friday. That’s a far cry from April, when the gauge of options prices was at a one-year high relative to the Cboe Volatility Index shortly after the Nifty 50 bottomed.
Kriti Shah, a quantitative analyst at Equirus Securities, sees a “bullish signal” in the Nifty 50 and favors call spreads to bet on higher gains, adding that the upcoming earnings season could offer some positive surprises.
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“India was held back earlier this year by high energy prices, elevated valuations and limited exposure to the AI business,” said Ben Powell, chief investment strategist for the Middle East and Asia Pacific at BlackRock Investment Institute. “As those pressures ease, investors may look beyond AI-heavy markets. This could put India back on investors’ radar as a distinct opportunity within emerging markets.”
