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The India Briefing

The ‘AI scaler’ opportunity

This month, we dive into the AI trade and how it has been hurting equity markets in India. While the situation is evolving rapidly, we think there are under-appreciated opportunities to capitalise on India’s AI journey, which is likely to look different to the more hardware-driven AI ecosystems in Asia. We see India as an ‘AI scaler.’

Please find below our latest thoughts on India:

  • India’s capital markets are entering March with, in our view, improving fundamentals on a number of fronts.
  •  The recent India–US bilateral trade agreement of 18% tariffs (reduced from 50% previously) in early February, and subsequent 15% universal global tariff post the US Supreme Court ruling, enhances export competitiveness and reduces some external uncertainty.
  • Although clarity on tariff implementation is unknown, the good news is that ‘peak tariff’ seems to have passed.
  • At the same time, domestic policy support is gaining traction. Monetary easing is well underway, and February’s Union Budget delivered a constructive fiscal impulse that is now filtering through the economy.
  • Structural reforms continue to reinforce the medium-term outlook. Lower overall income taxes, a more streamlined GST framework, expanded labour protections, and ongoing foreign direct investment (FDI) liberalisation are all beginning to have a measurable impact on economic activity and confidence.
  • GDP growth remains robust and is being modernised. The forthcoming revision to national measurements will better capture under-represented segments such as services, small and medium enterprises, and digital activity – areas that now account for a much larger share of economic output than they did a decade ago.
  • Encouragingly, India’s most recent earnings season was better than expected after several weak quarters. Corporate commentary, particularly from companies leveraged to urban consumption, pointed to early signs of demand recovery.
  • Despite these positives, Indian equity markets have yet to deliver a significant rally. The natural question is: what is holding India back?
  • From our perspective, a key factor is the market’s perception of an AI gap between India and other markets.
  • India missed the global AI-led rally that dominated 2025 performance. Its listed equity market generally lacks exposure to semiconductors and AI hardware, for example, which have been primary beneficiaries of the AI trade.
  • However, this does not mean India lacks AI exposure or tech expertise. 
  • Rather, India’s strength lies downstream – in AI talent development and large-scale deployment.
  • Domestic AI skills penetration in India is among the highest globally, with usage across fintech, ‘govtech’, IT services, and customer-service applications.1
  • Yet being an ‘AI scaler’ has so far generated limited market excitement. We believe this represents an under-appreciated opportunity.
  • Much like India’s rapid digitisation over the past decade – which delivered substantial productivity gains – AI adoption now represents the next wave of technological transformation if India is able to get it right. 
  • To compete effectively, Indian IT services companies must adapt to capture new revenue streams from corporate AI spend while creating specialised engineering roles focused on the transition from legacy to future-ready tech.
  • For example, one of India’s largest IT services firms is accelerating new value-creation areas including building AI agents, preparing enterprise data for AI models, re-engineering business processes using agents, and embedding responsible AI frameworks.2 It requires major skill to implement these tools at an enterprise level.
  • More broadly, India’s ambition in AI is increasingly visible on the global stage. The high-profile AI Impact Summit 2026, hosted in New Delhi this month, brought together technology leaders from Google, OpenAI, Microsoft, and Accenture alongside heads of state and other senior political figures from around the world. There were more than 200,000 registered participants.
  • India is actively shaping global AI norms, influencing both technology governance and trade diplomacy. The choice of India as host reinforces its position as a relatively neutral AI ecosystem amid US–China tech bifurcation.
Figure 1: India's Prime Minister Narendra Modi (centre) takes a group photo with AI company leaders including OpenAI CEO Sam Altman (second on right), Anthropic CEO Dario Amodei (right) and Google CEO Sundar Pichai (left)
India is having its AI moment at global summit, India's Prime Minister Narendra Modi takes a group photo with AI company leaders including OpenAI CEO Sam Altman, Anthropic CEO Dario Amodei and Google CEO Sundar Pichai

Source: Channel News Asia, Commentary: India is having its AI moment at global summit, as of 19 February 2026.

  • From a market perspective, AI enthusiasm has driven significant performance differentiation. With the Asian region, leaders in AI-enabling hardware and semiconductor manufacturing like MSCI Korea and MSCI Taiwan are up 48% and 22% year-to-date, respectively, compared with a decline of -3.2% for MSCI India.3
  • Any moderation in the global AI trade could see this trend start to unwind, especially if the recovery in Indian corporate earnings momentum continues as we head through 2026.
1 Government of India Press Information Bureau, AI@Work: Driving Productivity, Jobs, and Innovation, as of 12 February 2026.
2 Citibank, Investor AI Day 2026 – Key Takeaways, as of 17 February 2026.
3 Refinitiv, Allianz Global Investors, in USD, as of 25 February 2026.

 

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