India's Growing Appeal to Global Investors
As concerns over an AI bubble continue to rise, global fund managers are turning their attention to India as a prime location to diversify their equity investments in the coming year.
Expert Insights
According to Aberdeen Group Plc, Principal Asset Management Co., and EastSpring Investments, Indian stocks are expected to rebound next year. Strategists at HSBC Holdings Plc and Jefferies Financial Group Inc. share similar views, citing India's low correlation with AI trade as a hedge against global equities.
Key Drivers of India's Equity Gains
India's consumption-driven economy is regaining favor, driven by banking, consumer firms, and services. This offers a way to mitigate risks associated with a narrow group of AI winners. With tax cuts, labour law reforms, domestic liquidity, and supportive policies, India's equity market is poised for growth.
Top Picks and Investments
- Axis Bank Ltd
- Bharti Airtel Ltd
- TVS Motor Co. Ltd
These companies are among the top picks for Jefferies, which expects Indian equities to outperform if the AI-investment theme peaks out globally. Additionally, Amazon.com Inc and Microsoft Corp have committed a combined $52 billion in investments in India, primarily for AI infrastructure.
India's Unique Advantage
Unlike China, India lacks major pure-play AI names and exposure to the chip-design, manufacturing, and equipment ecosystem. This makes India a more attractive option for investors seeking to diversify their portfolios and reduce their exposure to AI-driven volatility.
As Christina Woon from EastSpring Investments notes, 'India's a good diversifier at this time.' With earnings expectations still reasonable and a strong domestic growth story, India is an appealing option for investors looking to tap into its equity market.
Local Factors Supporting Indian Equities
- Central bank interest rate cuts
- 8.2% economic growth in the latest quarter
- Pending trade deal with the US
These factors are providing a strong backdrop for Indian equities, making it an attractive option for investors in the coming year.