Foreign investors may increasingly shift their focus towards India as the exuberance surrounding global artificial intelligence (AI) and semiconductor stocks begins to wane, according to Gaurang Shah, Senior Vice President at Geojit Investments.
Shah notes that recent sell-offs in major global technology companies underscore a fundamental market principle: capital gravitates towards value, and investors quickly exit when valuations become excessively high. As international investors re-evaluate the richly priced AI and semiconductor sectors, India is poised to emerge as a more attractive destination for foreign capital.
Global Tech Froth Fades, India Offers Value
Shah was direct in his assessment of the substantial inflows into AI, electronics manufacturing services, and semiconductor firms across the US, China, and South Korea. He stated, "When valuations become frothy, naturally, these guys are going to be the first ones to sell." This suggests that the recent correction in innovation-heavy global trades might not just be technical, but could signal a broader search for fundamentally sound, relatively under-owned markets like India.
The current market environment sees Dalal Street striving to build momentum amidst ongoing geopolitical uncertainties, elevated oil prices, and a volatile global risk landscape. A key question for markets is whether foreign portfolio investors, who have been selective in India, will now begin to rotate back into domestic equities as the global tech hype cools.
India's Growing Appeal: Policy, Sectors, and Earnings
Shah expressed a constructive outlook on India, emphasizing the significant value present in the Indian market. He highlighted the government's comprehensive strategy for the broader electronics and semiconductor ecosystem, which includes initiatives for chip manufacturing and printed circuit boards. Additionally, he identified the defense sector as a structural theme offering substantial long-term potential.
These factors are crucial because foreign investors typically favor markets where policy clarity aligns with domestic manufacturing ambitions and sustainable earnings growth. Within this framework, India's attractiveness extends beyond traditional benchmark financials into sectors directly supported by industrial policy and strategic capacity building.
IT Sector Delivers Confidence Boost
Adding to India's investment case, Shah pointed to the strong performance of the country's technology sector. He noted that, with the exception of Wipro, the IT earnings reported so far were "much better than on the street estimates," showing "no dark spots or red flags." This marks a significant shift from previous months, when concerns over global demand, AI disruption, and slowing discretionary spending had dampened sentiment towards Indian IT firms. The better-than-expected earnings now suggest that investors may need to reconsider the sector for its steady, credible growth prospects.
Ultimately, India's argument to foreign investors increasingly hinges on its relative value, policy-backed opportunities across various sectors, and robust earnings resilience. Should the global AI trade continue to decelerate, India's previous underperformance could transform into a compelling entry point for international capital.