Foreign investors may rotate to India as AI trade froth fades, says Gaurang Shah

As global investors reassess richly valued AI and semiconductor plays, India could emerge as a more compelling destination for foreign capital, according to Gaurang Shah, Senior Vice President at Geojit Investments. Shah said the recent sell-off in global technology leaders reflects a simple market truth: money chases value, and when valuations turn excessive, investors exit quickly.

His comments come at a time when Dalal Street is trying to build momentum in the face of geopolitical uncertainty, elevated oil prices and a volatile global risk environment. The bigger question for markets now is whether foreign portfolio investors, who have remained selective on India, begin rotating back into domestic equities as global tech exuberance cools.

Value over hype

Shah was blunt in his assessment of global flows into AI, electronics manufacturing services and semiconductor names across the US, China and South Korea. “When valuations become frothy, naturally, these guys are going to be the first ones to sell,” he said, adding that once the unwind begins, investors often “sell until sold.”

That observation is significant because it suggests the recent correction in global innovation-heavy trades may not be merely technical. It may also mark the beginning of a broader search for relatively under-owned, fundamentally supported markets such as India.

Why India could benefit

On India, Shah struck a distinctly constructive note. “As far as India is concerned, I think there is a lot of value,” he said, pointing to the government’s blueprint for the broader electronics and semiconductor ecosystem, including chip manufacturing and printed circuit boards.

He also flagged defence as a structural theme with long runway potential. That matters because foreign investors typically reward markets where policy visibility aligns with domestic manufacturing ambition and earnings durability. In that framework, India’s appeal extends beyond benchmark financials into sectors tied to industrial policy and strategic capacity building.

IT earnings offer fresh comfort

Shah also argued that India’s technology pack has delivered an important confidence boost. Excluding Wipro, he said, the IT numbers seen so far were “much better than on the street estimates” and showed “no dark spots or red flags.”

That is a notable shift in narrative. For months, concerns around global demand, AI disruption and slowing discretionary spending had clouded sentiment on Indian IT. Better-than-expected earnings now suggest investors may need to revisit the sector, not for the outsized returns of an earlier cycle, but for steadier, more credible growth.

The market message

The broader takeaway is that India’s case to foreign investors may increasingly rest on relative value, policy-backed sectoral opportunities and earnings resilience rather than pure momentum. If the global AI trade continues to lose steam, India’s underperformance could start looking less like a weakness and more like an entry point.