AI market cooling could push investment flows toward India

Market watchers are paying attention to a larger worldwide trend that could reshape money flowing into Indian stocks. The question is what happens to the boom in artificial intelligence investments. Indian stocks have not kept up with gains seen in other markets this year, partly because the country lacks companies focused purely on AI technology.

Major financial institutions have warned about potential AI market corrections, with some analysts comparing the current situation to previous technology bubbles.

Analysts at Kotak Institutional Equities believe India’s best chance to get back on the radar of global investors might actually come if the worldwide AI investment craze falls apart. Investment levels in AI companies have reached high levels, with concerns about sustainability and whether this represents a market bubble.

Some investors have already started questioning whether AI-related companies are priced too high, though people disagree on whether prices will actually drop. If money does leave expensive AI stocks, some fast-growing Indian businesses that do not yet produce strong cash flows could still draw investment, according to these analysts.

Indian stock markets are showing little movement as trading across the region stays largely calm as per Bloomberg. Weak economic figures from the United States and questions about what the Federal Reserve will do next have pushed investors worldwide to take a careful approach, and Indian markets are not immune to this hesitation.

IPO market stays strong amid investor interest

However, the scene for new stock offerings tells a different story. As reported by Cryptopolitan, the U.S. IPO market has been experiencing its hottest activity since 2021, and India’s primary market is following a similar pattern.

Lenskart’s $821 million public listing received strong investor interest despite concerns about how the company was priced. Today, another major offering from Groww worth $747 million starts accepting bids from investors. At the same time, several large companies including State Bank of India, Adani Enterprises, and Mahindra & Mahindra are preparing to announce their financial results.

Shares of Vodafone Idea jumped 10 percent after the country’s highest court made an important statement. The court said the government has the right to look again at all money owed by the troubled phone company up until the financial year that ended on March 31, 2017. This review can include interest charges and penalties.

The company currently owes close to 2 trillion rupees, which equals about $22.5 billion. What remains unknown is how much the company might save if officials only review bills from this specific timeframe. Even after the big jump in price, the shares finished the day below their highest point from the past year, which happened on October 27 when the court first said the government could review these payments. This suggests investors have doubts about whether the review will actually help the company much.

Corporate earnings beat expectations

Debate continues about whether global investors are really returning to India, but companies themselves are putting up solid numbers. The earnings reporting period has reached its midpoint, and Motilal Oswal Institutional Equities says company profits grew 14 percent compared to last year.

This beats their earlier prediction of 9 percent growth. Companies dealing in raw materials and mid-sized firms drove most of these gains, leading the financial firm to increase its profit forecast for the Nifty 50 index by a small amount. The question now is whether companies reporting in the second half can keep up this pace or do even better.

Even with good results from some parts of the market, foreign investors keep pulling back from areas where prices seem too high or where growth stories face questions. Morgan Stanley points out heavy selling by foreign investors in consumer companies like Trent and Brainbees Solutions during the three months ending in September.

Both companies were once celebrated as fast-growing businesses, but their stock prices have dropped this year as excitement about India has cooled down. Foreign investments in India have dropped significantly, with startups and markets struggling as economic challenges mount. Foreign investment funds have taken more than $15 billion out of the country’s stock market so far in 2025.