Indian equity benchmarks posted their biggest single-day gain in four months on Thursday on prospects that India could regain favour among foreign investors after global AI-linked stocks took a beating.
Foreign investors have pulled out a record $32.7 billion worth of equities this year, set to be the worst for the benchmark Nifty 50 since 2011, due to a preference for AI-heavy markets over equities in Asia’s third-largest economy.
That trade hit some turbulence on Thursday as sticky US inflation data raised bets of further rate hikes and stoked doubts over the global AI investment boom. South Korea’s benchmark KOSPI stock index closed at a six-month low after heavy selloff in chipmakers triggered a circuit breaker. Japan’s Nikkei 225 also slumped about 5%.
In contrast, the Nifty 50 rose 1.66% to 22,997.35 and the BSE Sensex added 2.11% to 74,315.61.
“The reversal in AI trade is leading to expectations that foreign investors chasing the theme may look to diversify with non-AI markets like India. If foreign investors come back, large-cap stocks would be the biggest beneficiaries,” said Sunny Agrawal, head of fundamental equity research at SBICAPS Securities.
Eleven of the 16 major sectors rose. The broader small-caps and mid-caps lost 1.3% and 0.4%, respectively.
Indian companies indirectly linked to the AI theme, including through exposure to optical fibres and data centres, also slid.
Sterlite Technologies, HFCL, and MTAR Technologies lost an exchange-mandated maximum of 5% each, while Netweb Technologies and TD Power Systems lost 7% and 6.2%, respectively.
IT companies gained 1.8%, taking the index’s three-session rise to about 8.4% amid anti-AI trade and better-than-expected earnings from TCS and HCLTech over the last few sessions.
Heavyweight financials rose 1.7%, with HDFC Bank and ICICI Bank gaining 2.3% and 3.8%, respectively, ahead of their quarterly earnings over the weekend.
Bharti Airtel jumped 3.3% and Reliance Industries gained 3.4%, after the oil-to-telecom conglomerate’s unit Jio Platforms announced India’s largest IPO.