A sharp retreat in global artificial-intelligence stocks has begun changing capital flows into India, giving the rupee and domestic equities support after months of foreign-investor outflows. Provisional exchange data showed foreign investors purchasing a net $1.6 billion of Indian equities on Thursday, their largest single-day purchase in almost six years. That followed approximately $2.2 billion of net buying over the preceding four sessions.
The reversal coincides with a broad reassessment of AI-linked valuations. The Nasdaq Composite fell 5.5% on Thursday, while the Philadelphia Semiconductor Index dropped more than 12%. Nvidia, semiconductor manufacturers, data-centre operators and infrastructure providers were among the companies caught in the selloff. Concerns intensified after the US midterm election outcome raised the possibility of tighter scrutiny of AI infrastructure and greater resistance to data-centre construction.
Indian equities entered Friday with comparatively limited exposure to the highly valued semiconductor and AI-infrastructure companies leading the US correction. The reallocation has placed Indian financial services, industrial, consumption and non-AI technology stocks back in focus. The Indian rupee, which had been under sustained pressure during 2026, rose 0.5% during the week and touched a two-week high of 94.32 against the dollar before closing Thursday at 94.4750.
Lower oil prices also contributed to the currency’s improvement. India’s import requirements make crude prices an important influence on the trade balance, inflation and demand for dollars. The combination of softer oil, foreign equity purchases and unwinding of crowded global technology positions provided a stronger near-term backdrop for the currency.
The durability of the change remains dependent on whether foreign inflows continue after the initial portfolio rotation. The current buying follows a prolonged period in which global capital was directed towards US AI companies and semiconductor supply-chain businesses. Any sustained reallocation would affect Indian technology valuations, IPO demand and the cost of overseas capital for growth companies. Friday’s market activity is therefore being closely watched for evidence that the shift extends beyond a short covering or post-election adjustment.
