India draws biggest foreign stock inflow in nearly six years as global AI rout deepens

Foreign investors bought $1.6 billion worth of Indian equities on Thursday, their biggest single-day purchase in nearly six years, as falling oil prices, improving market sentiment and a global retreat from artificial intelligence (AI)-linked stocks boosted India’s appeal.

Overseas investors bought a net Rs 147.96 billion ($1.6 billion) of Indian shares, provisional stock exchange data showed. This was the highest daily purchase since February 24, 2021, when foreign investors bought Rs 287.39 billion, including a large promoter-driven block deal.

The buying extended a five-session streak during which foreign investors purchased a net Rs 208.35 billion (around $2.2 billion) of Indian equities. This marks a sharp reversal after overseas investors sold a record $30 billion of Indian stocks through October, putting pressure on the rupee and weighing on domestic benchmarks.

The foreign inflows coincided with a strong rally in Indian equities. The Nifty 50 and Sensex surged 2.4 per cent each on Thursday, closing at 24,536.6 and 79,310.01, respectively. Both indices have gained more than 8 per cent over six sessions, their longest winning streak in a year.

However, the recovery faces a fresh test as global markets come under pressure from a sharp sell-off in technology and semiconductor stocks.

Why foreign investors are returning to India

One of the major factors supporting India’s appeal is the recent decline in crude oil prices. India imports most of the oil it consumes, making its economy particularly sensitive to movements in global energy markets.

Higher crude prices had raised concerns over India’s import bill, inflation, the current account deficit and corporate profitability. The prospect of lower oil prices following the US midterm elections has improved the outlook for the world’s fastest-growing major economy.

The US election outcome has also lifted investor sentiment. Expectations of a more measured approach to trade and tariffs, alongside hopes of easing geopolitical tensions, have encouraged investors to reassess their exposure to emerging markets.

The simultaneous sell-off in AI-linked stocks has added another factor to the shift in global investment preferences. Investors are questioning the valuations of technology companies and the returns they can generate from the enormous sums being spent on AI infrastructure.

India’s relative lack of large AI-linked listed companies had previously limited its participation in the global technology rally. But as investors reconsider crowded AI trades, Indian equities could attract renewed attention.

Valuations and earnings prospects are also supporting the case for India.

India’s valuation premium relative to emerging markets has also declined, making domestic equities comparatively more attractive after months of underperformance.

Global AI sell-off puts India’s market recovery to the test

The optimism surrounding Indian equities faces a challenge from the latest developments in global markets.

US stocks suffered their steepest fall since the tariff-triggered market rout in April 2025 on Thursday. The Nasdaq Composite plunged 5.5 per cent, while the S&P 500 dropped 4.4 per cent. The Philadelphia Semiconductor Index fell 12.2 per cent as investors sold technology and chip stocks.

The sell-off intensified on concerns that the Democratic Party’s sweeping victory in the US midterm elections could increase regulatory scrutiny of AI infrastructure projects and slow the expansion of data centres.

Investors are also questioning whether technology companies will generate sufficient returns from their heavy investments in AI. High borrowing costs and growing opposition to data centres over their electricity and water requirements have added to concerns.

The pressure spread to Asian markets on Friday. South Korea’s Kospi fell 7.1 per cent in morning trading, while Japan’s Nikkei 225 declined 6.2 per cent. Asian technology and semiconductor companies came under pressure as investors reassessed the outlook for the AI supply chain.

Indian equity markets were yet to open for Friday’s trading session at the time of writing. The latest developments in global markets could therefore test the sustainability of the recent rally and the return of foreign investors.

There are also signs that the decline in crude prices may not be sustained. Brent crude futures rose nearly 4 per cent to $98.29 a barrel in Friday’s Asian trading, reflecting continuing uncertainty over the Iran conflict.

Despite the latest volatility, analysts see scope for Indian equities to maintain their recovery if domestic earnings improve and global financial conditions become more favourable.

The Nifty 50 and Sensex, however, remain down 6.1 per cent and 6.9 per cent, respectively, so far in 2026.

Whether Thursday’s record foreign buying signals a sustained return of overseas capital or a temporary reassessment of global portfolios will become clearer as markets respond to the latest sell-off. Friday’s trading session will provide an early indication of how resilient India’s recovery remains amid rising global volatility.