AI retreat fuels India stock comeback in great rotation trade
The MSCI India gauge has rebounded 11% from a six-month low set in October.
In the first nine months of 2026, Indian stocks experienced significant losses as the artificial intelligence trade attracted global investor capital. However, the unwinding of this strategy has led to a rebound in the country's equities, with the MSCI India gauge recovering 11% from a six-month low in October. This resurgence has added over US$400 billion in value, nearly erasing the losses incurred in 2026. The country's limited exposure to AI has become a key advantage in this regard.
Global funds, including Calamos Investments and Fidelity Investment Management, have become more favorable towards India due to improving macroeconomic conditions and accelerating earnings growth. Tan Altundag, an investment manager at Pictet Asset Management, stated that the improved balance between macro headwinds, portfolio flows, and valuations has led to increased exposure to India.
Similarly, Nikhil Rastogi from Kabouter Management remains optimistic about India's long-term prospects, noting the attractiveness of current valuations.
The recent decline in oil prices has also contributed to the positive sentiment, as Indian shares remain heavily reliant on imported energy. Brent crude prices have dropped over 18% since October, reducing the cost burden for Indian companies. Despite the rally, Indian stocks remain a relative underperformer compared to other regional benchmarks in 2026. However, many investors remain cautiously optimistic, with some fund managers planning to gradually increase their exposure to the market over time.
Written by urgent.news from Straits Times Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
