India stock market emerges as hedge against AI volatility

Global fund managers are increasingly viewing the Indian sharemarket as a strategic hedge against volatility in the artificial intelligence (AI) sector. Due to its structural low exposure to technology compared to markets in the US, Taiwan, Korea, and Japan, India is seen as less susceptible to potential corrections in the AI trade.

Foreign institutional investors have transitioned to net buyers of Indian stocks, with August recording approximately $3 billion in inflows, the largest monthly inflow in nearly two years. This interest is supported by improving earnings, a stabilizing currency, and a drive for diversification into sectors such as consumer services, e-commerce, metals, mining, and healthcare.

While the Nifty 50 has lagged globally with a 6.4 percent decline over the past 12 months, its low correlation to the AI sector remains its primary appeal to investors seeking to mitigate risks related to tech-driven market shifts.