Despite a challenging year for Indian equities, investment experts believe foreign investor outflows may be nearing an end, with India’s limited exposure to the direct AI trade emerging as a potential strength rather than a weakness.
According to Lighthouse Canton, India could benefit from what it describes as an “advantage of absence” in the AI sector. While global investors have heavily favored semiconductor-focused markets such as South Korea and Taiwan, concerns are now emerging around concentrated investments and valuation risks in those regions.
Indian benchmark indices have faced pressure in 2026, with the Nifty 50 and Sensex declining by around 11% and 13%, respectively. The IT sector has been particularly impacted, with the index falling 27% amid concerns over AI-driven disruption. Rising crude oil prices following the Iran conflict have also weighed on the broader economic outlook.
Foreign investors have withdrawn a record $30 billion from Indian equities this year, directing capital toward semiconductor and memory-driven markets such as South Korea and Taiwan. Both markets recently surpassed India in market capitalisation.
However, Abhay Laijawala, Chief Investment Officer, India, at Lighthouse Canton, believes excessive concentration in a single theme can increase vulnerability to unexpected risks. He noted that recent foreign outflows from South Korea and Taiwan in June suggest investors are beginning to reduce exposure due to concerns over crowded positions and market concentration.
Unlike those markets, India has limited exposure to chip manufacturing but offers opportunities across sectors expected to support the next phase of AI growth. These include power, data centres, electrical equipment, cooling systems, engineering and capital goods.
“We have plenty of picks and shovels,” Laijawala said, adding that India’s lack of a direct AI trade could work in its favour.
The firm’s positive outlook remains dependent on oil prices. According to Laijawala, crude prices between $90 and $94 per barrel may be manageable, while a rise to $120-$130 could impact economic stability and corporate earnings. He also identified El Nino as a near-term risk.
Lighthouse Canton currently favours sectors such as capital goods, engineering, power, electrical equipment, defence, healthcare, pharmaceuticals and large banks. The firm believes banks could benefit from increased corporate borrowing as capital expenditure activity improves.
Also read: Viksit Workforce for a Viksit Bharat
Do Follow: The Mainstream LinkedIn | The Mainstream Facebook | The Mainstream Youtube | The Mainstream Twitter
About us:
The Mainstream is a premier platform delivering the latest updates and informed perspectives across the technology business and cyber landscape. Built on research-driven, thought leadership and original intellectual property, The Mainstream also curates summits & conferences that convene decision makers to explore how technology reshapes industries and leadership. With a growing presence in India and globally across the Middle East, Africa, ASEAN, the USA, the UK and Australia, The Mainstream carries a vision to bring the latest happenings and insights to 8.2 billion people and to place technology at the centre of conversation for leaders navigating the future.