So far in 2026, domestic indices Nifty 50 and Sensex have experienced declines of approximately 11% and 13%, respectively, driven by concerns of AI-induced disruptions that led to a 27% drop in the heavyweight IT index, compounded by a crude price surge following the Iran conflict that negatively impacted the macroeconomic landscape.
This year, foreign investors have withdrawn a staggering $30 billion from equities, diverting their funds towards South Korea and Taiwan, which are heavily focused on semiconductor and memory sectors. These two markets have surpassed India in market capitalization over the past month.
Abhay Laijawala, chief investment officer for India at Lighthouse Canton—a global wealth and asset management firm overseeing more than $5 billion—remarked that when sector concentration reaches such heights, investors often underestimate risks emerging from outside the core business model. He indicated that both South Korea and Taiwan have seen some foreign outflows in June, signaling investor caution regarding crowded trades and index concentration.
In contrast, India has limited stakes in chip fabrication, yet provides a robust, publicly traded landscape linked to the next wave of AI investments in areas like power, data centers, electrical equipment, cooling systems, engineering, and capital goods, Laijawala explained to Reuters on June 12.
“We possess a wealth of tools and resources,” he stated, emphasizing that India’s lack of participation in the AI trend could be advantageous.
Laijawala’s perspective aligns with insights from asset manager BlackRock, which commented earlier this week that India’s equity market had been overly penalized due to its absence of a direct AI influence.
However, Lighthouse Canton’s optimistic outlook for Indian markets is dependent on crude oil prices stabilizing around $90 a barrel.
While oil priced between $90-$94 a barrel can be managed, levels reaching $120-$130 could jeopardize macro stability and profit margins, with El Niño also posing a near-term risk, Laijawala noted. “Yet, sectors less affected by monsoons could provide some protection.”
If geopolitical conflicts diminish and oil prices decrease, few markets would benefit as substantially as India, he remarked, suggesting that such a scenario could provoke a surge in foreign investments in Indian equities.
Lighthouse Canton favors sectors like capital goods, engineering, power, electrical equipment, defense, healthcare, pharmaceuticals, and large banks.
According to Laijawala, banks are poised to benefit as a revival in capital expenditure shifts credit demand from consumers to corporate entities. He also pointed out that the best investment opportunities lie beyond the Nifty, where the earnings momentum remains strong despite more appealing valuations at the benchmark level.
