India’s limited AI exposure can create upside once FIIs are back to fundamentals
December 29th, 2025
If global investors redirected capital away from India to markets more closely linked to the AI hardware cycle, then a natural rebalancing could favour India once that phase eases. In the context of AI, India is emerging as a strong second-order beneficiary of AI. While it may not be building foundational AI infrastructure, it is rapidly emerging as an important participant in the application econ…
Artificial Intelligence (AI) has taken global markets by storm. From chip manufacturers to cloud computing giants, AIrelated companies have attracted unprecedented investment. As AI enthrals capital markets the world over, India finds itself on the sidelines: an economy with brilliant engineering talent but minimal direct exposure to the AI gold rush.
According to PitchBook data, US venture capital funding for AI reached $97 billion in 2024. In the first three quarters of 2025 alone, AI startups attracted $160.8 billion of the $250.2 billion in total US venture funding.
In 2025, AI company valuations in China grew 96%. Taiwan saw record quarterly foreign investment of $15 billion in the third quarter of 2025. South Korea saw its strongest foreign investor positioning in over a decade.
Indian markets’ relative under-indexing to the AI infrastructure story is one of the factors behind sustained foreign portfolio investor (FPI) outflows—around $23 billion in 2024 and around $13 billion so far in 2025—despite relatively strong domestic fundamentals.
Why did our markets not collapse? It was because liquidity from domestic investors absorbed sustained FPI selling. As per data from the Association of Mutual Funds in India in November, monthly systematic investment plan contributions crossed Rs.29,000 crore and the industry’s average assets under management topped Rs.81 lakh crore.
Excerpts from the interview have been covered here on the Economic Times website :-
Posted by Keyur Majmudar, Managing Partner
