Mumbai: Early signs of a slowdown in the artificial intelligence (AI) investment boom in the United States could help bring foreign investment back to India, according to market experts.
The view comes after the technology-heavy Nasdaq index in the US fell by around 5 per cent, raising concerns that the strong rally in AI-related stocks may be losing momentum.
Heavy Foreign Selling Continues
Foreign Portfolio Investors (FPIs) have remained net sellers in the Indian stock market this year.
According to NSDL data, FPIs sold Indian equities worth Rs 32,963 crore in May. The selling trend continued in June, with net outflows of Rs 42,926 crore recorded till June 6.
This has taken the total FPI selling in 2026 so far to nearly Rs 2.84 lakh crore.
Why AI Trade Matters
Market experts believe that a large portion of foreign investment shifted away from emerging markets such as India towards US technology and AI stocks over the past year.
According to Dr. V K Vijayakumar, if enthusiasm for AI-related stocks begins to cool, some of that global capital could return to markets like India.
Government and RBI Measures
To attract foreign investment and improve forex inflows, the government and the Reserve Bank of India have introduced several measures.
These include tax exemptions on certain investments in government securities, support for FCNR deposit hedging costs, a larger forex swap window, greater access to government bonds through the FAR route, and higher investment limits for NRIs and OCIs in Indian equities.
Rupee Shows Signs of Recovery
The measures have also helped improve the Indian currency.
The rupee, which had weakened to 96.96 against a key currency benchmark, recovered to 94.94 on June 5, indicating improved investor confidence and stronger foreign exchange flows.
Markets Remain Cautious
Despite these positive developments, Indian markets ended last week lower due to geopolitical concerns and uncertainty surrounding global trade.
However, strong domestic economic fundamentals helped limit the overall decline in benchmark indices such as the Nifty 50 and the BSE Sensex.
