By Savio Shetty and Samie Modak
After losing out big on the global AI rally, Indian equities are regaining the attention of investors seeking to weather the latest market turbulence.
With the artificial intelligence frenzy roiling benchmark gauges from Asia to the US, the NSE Nifty 50 Index is becoming a safe haven of sorts for global investors. In the first half of the year, it moved 1% or more on just about one-third of the days — less than the MSCI Emerging Markets Index and barely more than the S&P 500 Index.
India’s lack of AI plays has been a hurdle most of the year as investors turned to markets like South Korea and Taiwan that delivered stellar returns. But with concerns mounting over the sustainability of that trade, interest in India is slowly coming back. In June, the Nifty 50 outperformed the MSCI Emerging Markets Index by the most since November, while foreign outflows were the smallest in four months.
Indian equities remain some of the world’s worst performers this year, but the tide is starting to turn as the rupee stabilizes after hitting a record low and oil gains that tanked shares of refiners and airlines recede on easing tensions in the Middle East. That’s reduced inflation concerns and brightened prospects for India’s economic growth, according to a government report at the end of June.
At the same time, market players are getting more upbeat about the upcoming earnings season, which Tata Consultancy Services Ltd. kicks off on Thursday.
“The fall in commodity prices has altered the macro outlook for India almost overnight,” said Sandip Sabharwal, founder of research house Asksandipsabharwal.com in Mumbai. “Lower commodity prices, improving capital flows and stable interest rates create an environment where earnings upgrades are likely to exceed downgrades over the coming quarters.”
In a note to clients, Morgan Stanley analysts including Ridham Desai wrote last month that India has become a “much larger macro asset class.” The less volatile inflation data in recent years support equity valuations and turn the market into one of defensive growth that can withstand global shocks better than it used to, they said. Over the past decade, the Nifty 50 almost tripled, delivering annual gains of more than 10% on six separate years.
The benchmark index logged 38 sessions with moves of 1% or more in either direction in the first six months of 2026, compared with 59 for MSCI’s emerging-market and Asian gauges and 32 for the S&P 500. South Korea’s Kospi index was off the charts, with 79 days of fluctuations of at least 1% — or two-thirds of the days in 2026.
Meanwhile, the India NSE Volatility Index dropped for a third straight month in June, falling below its one-year average and reaching its lowest level since February on Friday. That’s a far cry from April, when the gauge of option prices was at a one-year high relative to the Cboe Volatility Index, shortly after the Nifty 50 tanked to a low.
Kruti Shah, a quantitative analyst at Equirus Securities, sees a “bullish undertone” in the Nifty 50 and favors call spreads to bet on more gains, adding that the upcoming earnings season may offer some positive surprises.
“India was held back earlier this year by higher energy prices, elevated valuations and limited exposure to the AI trade,” said Ben Powell, chief investment strategist for the Middle East and Asia Pacific at BlackRock Investment Institute. “As those pressures have eased, investors may look beyond AI-heavy markets. That could put India back on investors’ radar as a differentiated opportunity within emerging markets.”
