Indian equities outperform Asia-Pacific markets in October as investors shift away from AI stocks

Indian equities outperformed Asia-Pacific markets in October, driven by a shift in investor focus away from AI-sensitive North Asian markets, as per a Goldman Sachs Research report. The trend also led to a sector rotation within India's domestic market, with investors moving from AI-linked companies to IT services. India's performance surpassed the broader Asia-Pacific region excluding Japan by 7 percentage points in October, reversing its underperformance during the first nine months of 2026.

This improvement was attributed to market rotation away from AI-sensitive North Asian markets. IT services led the domestic market, outperforming the NIFTY benchmark by 14 percentage points in October, while AI enabler stocks underperformed the index by 6 percentage points. The broader market saw a recovery, with the NIFTY rising 2 percent, outperforming the MXAPJ index by the same margin.

Mid-cap and small-cap stocks led the advance, rising 3-4 percent, while the pharmaceutical sector gained 7 percent. Foreign institutional investors turned net buyers, injecting $1.2 billion into Indian markets during the week, though they remained net sellers with outflows of $31 billion so far in 2026. Domestic institutional investors bought $400 million during the week, bringing their year-to-date inflows to $75 billion.

Corporate earnings remained robust, with 89 MSCI India companies reporting higher-than-expected profits. However, earnings performance varied across sectors, with metals and mining, utilities, and healthcare showing positive surprises, while cement, materials, and consumer discretionary companies faced more disappointments. India's forward price-to-earnings valuation stood at 18.4 times, with the market trading at a 92 percent premium to the broader Asia-Pacific region, close to its historical highs.