Indian Markets an Anti-AI play for 2026? Global Funds appear to believe so

Global fund managers looking to diversify their investments beyond AI are looking at Indian markets as a potential hedge, according to a Bloomberg report, citing multiple asset managers.

Risks with regards to AI plays, their valuations and subsequent unwinding are beginning to roil Wall Street over the last two sessions, led first by results of Oracle, and then Broadcom, which spilt over to AI leaders such as Nvidia and AMD as well.

India's benchmark Nifty 50 index has returned 10% so far this year, making a new record high in the process, but the broader markets have underperformed. The Nifty Midcap 100 is up only 5.5%, while the Smallcap index is down 7.3% so far, with a handful of trading sessions left for the year.

However, Aberdeen Group Plc. expects Indian equities to rebound in 2026, while Principal Asset Management and Eastspring Investments view India's low AI co-relation as a hedge against the tech-heavy markets such as the US and others.

The 10% return on the Nifty is a sharp underperformance compared to global peers such as the KOSPI in South Korea, which is up over 60%, or even the S&P 500, which is up 13%. Brazil's BOVESPA index is up 34% this year, while the CSI 300 in China is up 20%.

“India can be a good diversifier for portfolios in 2026 as it has low correlations with other markets and any pause in AI trade will see money flowing into India,” Raj Singh, multi asset manager at Principal AMC, said. India is a strong domestic growth story and benefits from tax cuts, labor law reforms, domestic liquidity, supportive policies, and stabilization in corporate earnings, he said.

Global tech giants like Amazon and Microsoft have committed an investment of over $50 billion into AI infrastructure in India, but the market does not have any pure-play AI names unlike other markets in US and China. India's largest IT services company, Tata Consultancy Services (TCS) has made acquisitions within the AI space, but has not received an overwhelming response from investors.

“India’s a good diversifier at this time,” said Christina Woon, a portfolio manager at Eastspring Investments. Investors can tap India’s domestic growth drivers, with earnings expectations still more reasonable than in many other markets, she said.

Fund managers believe that GDP growth at 8.2%, a dovish central bank and reasonable earnings growth expectations can drive upside on Dalal Street in the upcoming year.

“India could surprise next year after a lackluster 2025,” said Jerry Goh, investment director of Asian equities at Aberdeen. “We are carefully positioning ourselves in areas where valuations look relatively more attractive.”