A JP Morgan report called India the natural artificial intelligence (AI) hedge based on the premise that the market is large, liquid and has big domestic institutional investors that keep it ticking without depending on foreign capital.
Within a month of the report, Indian markets are behaving exactly as the bank projected.
Indian software stocks had their best week in about 18 years as a sell-off in global AI stocks pushed investors towards markets that had missed the AI boom, mainly India’s information technology (IT) services companies.
The Nifty IT index rose 3.92 per cent on Friday to 31,924.10, taking its gain for the week to 11.72 per cent, its steepest weekly rise since April 2008.
The 10 stocks in the index added ₹2.75 trillion in market value over the week — ₹97,681 crore of it on Friday alone.
It was the second straight weekly gain for both the benchmarks and their biggest since April 10. IT stocks accounted for about 94 of the Nifty’s 149-point rise on Friday.
“India’s market thrives on foundational growth engines. It is large and liquid, with a weight of around 12 per cent in the MSCI EM benchmark, while the main alternative — domestic China, at roughly 25 per cent — is contending with a softer growth backdrop. Other non-AI havens, such as Southeast Asia, Latin America and emerging Europe, are too small to absorb large allocations,” said the JP Morgan report which was released on September 15.
The shift began on Wednesday, when US inflation data set off a sell-off in AI-linked stocks.
The Nasdaq Composite fell 1.88 per cent that day, and Nvidia lost 4.9 per cent between Tuesday and Thursday. The rout reached Asia’s chip-making markets on Thursday: South Korea’s Kospi fell 7.57 per cent, triggering a circuit breaker on memory-chip stocks, while Japan’s Nikkei dropped 4.9 per cent and Taiwan’s benchmark 3.4 per cent. The yield on the 10-year US Treasury eased to 5.086 per cent.
While in India, IT major Tech Mahindra’s stock jumped 8.48 per cent on Friday and 18.22 per cent during the week, after its revenue rose 15.6 per cent and margins widened by about 260 basis points (bps), though net profit missed estimates.
Wipro rose 5.95 per cent on Friday and 13.43 per cent over the week, despite a profit miss and a 58.6 per cent fall in large deal wins, as its margins improved.
Tata Consultancy Services (TCS), which reported $9.6 billion in deal wins, said AI now accounts for more than 10 per cent in revenue. It gained 14.33 per cent in the week, adding ₹1.12 trillion in market value.
Infosys rose 13.46 per cent ahead of its results, due on October 22–23, and HCL Technologies was up 13.42 per cent after narrowing its revenue guidance to 1.6–3.1 per cent.
“Strong quarterly results and upbeat management commentary reinforced confidence in the (IT) sector’s earnings outlook. Softer crude oil prices and a strengthening rupee further supported sentiment. Fast moving consumer goods (FMCG) stocks remained under pressure amid concerns over Q2 margin compression from elevated input costs. The sectoral divergence reflects investors’ preference for earnings visibility amid persistent cost pressures,” said Vinod Nair, head of research, Geojit Investments.
Somil Mehta, head of retail research at Mirae Asset Sharekhan, said, “IT stocks have seen a strong recovery this week, supported by the quarterly results and attractive valuations after the sharp correction. The recent rally suggests that investor sentiment is improving, but the key now is whether companies can sustain earnings growth.”
Foreign portfolio investors turned net buyers on Friday, purchasing shares worth ₹1,166 crore, according to provisional exchange data. This is their first net purchase since September 23.
They had sold about ₹13,700 crore between October 9 and 15. Domestic institutions were net sellers worth ₹3,661 crore, their first net sale since August 10.
Pharmaceutical and healthcare stocks lagged. The Nifty Pharma index slipped 0.69 per cent during the week and the Nifty Healthcare index fell 1.08 per cent, with Max Healthcare Institute (down 4.28 per cent) and Apollo Hospitals Enterprise (down 1.71 per cent) among the Nifty’s five biggest losers.
Nestle India was the worst performer, down 5.06 per cent for the week, losing ₹13,016 crore in market value, after its September-quarter results.
Larsen & Toubro fell 2.06 per cent and InterGlobe Aviation 3.02 per cent. Outside the Nifty, Yes Bank lost 14.63 per cent.
