India's limited exposure to artificial intelligence (AI) stocks could be turning into an unexpected advantage for its equity markets. Zerodha founder and CEO Nithin Kamath believes the absence of major AI companies in Indian stock market indices has helped domestic equities remain relatively less volatile amid global AI-driven market movements.
In a LinkedIn post, Kamath said, "Having no AI companies has meant that Indian markets have been less volatile. I think we definitely have an 'anti-AI trade' benefit."
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The observation comes as AI-linked stocks have significantly outperformed traditional market benchmarks over the past few years, but have also experienced sharp corrections.
A Zerodha chart accompanying his post highlights the performance gap. It tracks a hypothetical Rs 100 investment made on January 3, 2022, across 31 global AI companies, with quarterly rebalancing.
By the latest reading, the investment would have grown to Rs 426 in an equal-weighted portfolio and Rs 267 in a market-cap-weighted portfolio. In comparison, the Nifty 100 reached Rs 143, while the Nifty IT index stood at Rs 84.
The timing of Kamath's observation is significant. On November 5, foreign investors bought a net $1.6 billion worth of Indian equities, their biggest single-day purchase in nearly six years, as falling crude oil prices and a retreat from AI-linked stocks improved India's appeal.
However, India's advantage comes with a caveat. Limited exposure to global AI giants may offer some protection during a technology-led correction, but it does not automatically make Indian equities a safe haven or guarantee foreign inflows.
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India's relatively weak exposure to AI-linked stocks has also been a disadvantage during the global technology rally.
The bigger question is whether India's lack of AI-heavyweight stocks will continue to provide a cushion as global investors reassess their AI investments.
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