How to hedge AI risks? The "top choice" of global funds: the Indian stock market
Analysts believe that the attractiveness of the Indian market is rising as its correlation with global AI trading is low and valuations are returning to reasonable levels. Institutions such as Aberdeen, Xinan, and Hanya Investment are viewing the Indian stock market as a key choice for hedging AI risks
As concerns about the AI bubble grow, global funds are viewing the Indian stock market as a key choice for hedging risks.
According to a Bloomberg report on December 15, several large global asset management firms, including Aberdeen, Invesco, and Hanseatic Investment, are actively considering investment opportunities in the Indian market. They generally believe that the low correlation of the Indian stock market with global AI trades makes it an effective tool for hedging global stock market risks.
Raj Singh, a multi-asset manager at Invesco, stated, “India can be a good diversification choice for portfolios in 2026, as it has a lower correlation with other markets, and any pause in AI trading will see funds flowing into India.”
Many institutions expressed similar views. Strategists from HSBC Holdings and Jefferies Financial Group also believe India has hedging value. Christina Woon, a portfolio manager at Hanseatic Investment, pointed out, “India is a great diversification tool at this time.”
A “Safe Haven” Against AI?
The backdrop of this shift is that the AI investment frenzy shows signs of cooling, and after underperforming its global peers in 2025, the valuation of the Indian stock market has returned to near its five-year average level, making it attractive again. Strategists note that if the global AI investment theme peaks, funds may flow out of the tech sector and into India.
Unlike markets that heavily rely on tech stocks, the upward momentum of the Indian stock market mainly comes from traditional sectors such as banking, consumer goods companies, and services. This unique market structure provides investors with a path to diversify risks and avoid the problem of over-concentration in portfolios due to a few AI winners.
A notable feature of the Indian market is its lack of pure AI investment targets. Although Amazon and Microsoft recently pledged to invest a total of $52 billion in India over the next few years, most of which will be used for AI infrastructure, the country does not have major AI-listed companies like the U.S. chipmaker Nvidia, nor does it have influential companies in the chip design, manufacturing, and equipment ecosystem. Early AI initiatives from Tata Consultancy Services have also not attracted much interest from investors.
At the same time, the market anticipates that India is about to sign a trade agreement with the United States, which has also become a potential positive factor. Jerry Goh, the director of Asian equity investments at Aberdeen, stated, “After a lackluster 2025, India may surprise next year. We are cautiously positioning ourselves in areas that appear relatively more attractive in terms of valuation.”
