After missing out on much of the global artificial intelligence-driven rally, Indian equities are once again attracting investor interest as markets grapple with fresh bouts of volatility.
As the AI boom continues to drive sharp swings across stock markets from Asia to the United States, India’s benchmark NSE Nifty 50 Index is increasingly being viewed as a relatively stable destination for global investors. During the first half of the year, the index recorded daily moves of 1% or more on only about one-third of trading sessions, making it less volatile than the MSCI Emerging Markets Index and only slightly more volatile than the S&P 500.
India’s limited exposure to AI-focused companies had weighed on investor sentiment for much of the year, as markets such as South Korea and Taiwan delivered strong gains on the back of the technology rally. However, with questions emerging over the sustainability of that trade, investors are gradually returning to India. In June, the Nifty 50 outperformed the MSCI Emerging Markets Index by its widest margin since November, while foreign investor outflows fell to their lowest level in four months.
“India’s calm comes down to one thing: It sits outside the AI trade,” said Maxence Visseau, Chief Investment Officer at Dubai-based Arkevium Capital. He added that the firm remains neutral on Indian equities and uses them as a diversification play. “India works as an AI hedge inside the emerging markets complex,” he said.
Although Indian equities remain among the weaker-performing major markets this year, sentiment has begun to improve as the rupee stabilizes after touching a record low and oil prices retreat following easing tensions in West Asia. Lower crude prices have eased pressure on sectors such as airlines and refiners, while also reducing inflation concerns and improving India’s economic outlook, according to a government report released at the end of June.
Investor optimism is also building ahead of the upcoming corporate earnings season, which begins with Tata Consultancy Services Ltd. reporting its quarterly results on Thursday.
“The decline in commodity prices has changed India’s macroeconomic outlook almost overnight,” said Sandip Sabharwal, founder of Mumbai-based research firm Asksandipsabharwal.com.
“Lower commodity prices, improving capital flows and stable interest rates are creating conditions where earnings upgrades are likely to outnumber downgrades over the coming quarters,” he added.
In a recent note to clients, Morgan Stanley analysts led by Ridham Desai said India has evolved into a “much larger macro asset class.” They argued that more stable inflation over recent years has strengthened equity valuations and transformed India into a defensive growth market capable of withstanding global shocks more effectively than before. Over the past decade, the Nifty 50 has nearly tripled, delivering annual returns of more than 10% in six separate years.
During the first six months of 2026, the benchmark index recorded 38 sessions with gains or losses of at least 1%, compared with 59 such sessions for MSCI’s emerging market and Asia indices. The S&P 500 saw 32 sessions with similar moves, while South Korea’s Kospi Index experienced the highest volatility, recording 79 trading days with swings of 1% or more.
Meanwhile, the India NSE Volatility Index declined for a third consecutive month in June, falling below its one-year average and touching its lowest level since February by Friday. The sharp decline marks a significant reversal from April, when volatility had climbed to its highest level in a year relative to the Cboe Volatility Index after the Nifty 50 slumped to its yearly low.
Kruti Shah, a quantitative analyst at Equirus Securities, said the Nifty 50 continues to display a “bullish undertone.” She expects the upcoming earnings season to deliver positive surprises and favours call spread strategies to capitalise on further gains.
“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 begin looking beyond AI-heavy markets. That could put India back on investors’ radar as a differentiated opportunity within emerging markets,” he added.
