- Global investor sentiment is shifting strongly in favor of Indian equities due to robust growth prospects
- The global AI trade is unwinding sharply, impacting tech-heavy indices and prompting market rotation
- Foreign portfolio investor flows have turned positive for Indian equities amid geopolitical uncertainties
Global investor sentiment is shifting decisively in favor of Indian equities, fueled by a robust domestic growth outlook and a sharp unwinding of the global artificial intelligence (AI) trade, according to the latest edition of Jefferies' closely watched Greed and Fear report. Following recent interactions with over 50 global investors, the brokerage highlighted in its report that a palpable positive change in sentiment is seen towards India's equity strategy amid the shift in global tech trade.
The shift comes at a time when global markets are experiencing a significant rotation away from high-flying tech and AI-linked assets. According to the report, the "AI trade" among global investors, especially in Asian markets, is now facing a sharp reversal. This cooling off is starkly visible in broader tech-heavy indices, with the benchamrk MSCI Korea index tumbling approximately 30% and key AI-linked token stock prices dropping nearly 25% from their recent peaks.
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How is 'reverse AI trade' fueling foreign capital in Indian markets?
As the froth comes out of the global tech rally, emerging market investors are increasingly seeking the safety of stable, high-growth alternatives-and India is emerging as a prime beneficiary. This renewed optimism is already translating into hard capital for the market. Jefferies highlighted that foreign portfolio investor (FPI) flows have officially turned positive for Indian equities despite the ongoing geopolitical uncertainties, reversing the prior trend of sluggishness and outflows.
Over the last five weeks alone, Indian markets have witnessed a net FPI inflow of $300 crore (approximately $3 billion), signaling a robust return of foreign appetite for Indian assets. Beyond the favorable global rotation, Jefferies points to India's underlying macroeconomic and corporate fundamentals as the primary anchors for this renewed interest. The earnings outlook for India remains exceptionally strong especially amid the strong Q1 results, according to analysts.
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India's GDP outlook, earnings growth among key drivers
Analysts project a positive trajectory for corporate profitability, forecasting FY27 earnings growth to accelerate to 14%-a solid four percentage point jump year-over-year. A key driver of this corporate earnings expansion is the country's broader economic momentum. The report projects India's nominal GDP growth to comfortably exceed the 12% mark.
This double-digit expansion is expected to serve as a massive tailwind for domestically oriented sectors, with the Banking, Financial Services, and Insurance (BFSI) space positioned as a major beneficiary of the ongoing credit and consumption boom. Ultimately, Jefferies suggests that as global investors recalibrate their portfolios in the wake of AI market volatility, India's blend of macroeconomic stability, accelerating earnings, and strong domestic sectors is proving too attractive to ignore.
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