India’s record $29 billion foreign selloff wasn’t a verdict on the market but collateral damage from the global rush into AI stocks in Korea and Taiwan, according to Jefferies’ Global Head of Equity Strategy Christopher Wood.
He says FIIs will return in force only if the AI trade has peaked or Indian equity valuations fall sharply.The first trigger may now be emerging.
Foreign investors bought a net $1.8 billion of Indian equities through July 15, their first monthly purchase since February, as money began rotating out of the AI trade.The shift, while still modest compared with the scale of the preceding selloff, could signal that globabaggl investors are beginning to reconsider a trade that has left India on the wrong side of the AI-driven market rally.“India as a stock market has remained the inverse AI trade,” Wood wrote in his latest GREED & fear report.
The July inflows, he said, have come as part of a rotation away from AI stocks.Wood argued that the unprecedented selling was driven less by a deterioration in India’s fundamentals and more by the pressure on emerging-market investors to chase surging technology hardware stocks elsewhere in Asia.“The main driver of this foreign selling was nothing to do with India,” he wrote.Dedicated emerging-market funds raised cash by selling Indian shares and deploying it into Korea and Taiwan during the first half.
