Are FIIs chasing AI stocks? 4 D-Street triggers already priced in — What’s next?

Foreign Institutional Investors (FIIs) appear to be chasing opportunities in global markets where artificial intelligence (AI) is driving growth narratives.

According to Manish Sonthalia, Director & Chief Investment Officer at Emkay Investment Managers, the focus of FIIs has shifted toward AI-heavy markets such as the US and Taiwan, both of which have become debt-laden due to the frenzy around AI investments.

However, Sonthalia believes this could eventually benefit India. “There’s an active debate across markets about AI versus non-AI stocks. The euphoria around AI is real, but valuations in those markets are elevated. If that view cools off, India will be a direct beneficiary,” he said.

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4 Key Factors Already Priced In on Dalal Street

Sonthalia expects the Nifty50 to reach the 29,000–30,000 level in the next 9–12 months, with strong support at 25,000. He highlighted that four major factors are already priced into Indian equities: earnings growth, liquidity, interest rates, and tariff issues.

Despite near-term volatility, the macro environment and earnings outlook remain encouraging. “Even in the case of a time-wise correction, valuations are attractive,” he added.

Earnings Season Surprises Positively

The ongoing earnings season has been slightly better than expected, both for large caps and midcaps. Nifty50 companies have reported around 10% topline growth and 6–7% bottom-line growth.

The performance of the oil and gas sector has been particularly strong, while auto, healthcare, construction, and metals have also posted healthy numbers.

“Across the board, numbers are better than anticipated. Even excluding oil and gas, midcap and smallcap results aren’t disappointing. Consumption-led earnings growth will likely be visible from Q3 onwards,” Sonthalia noted.

Where Should Investors Look Now?

Sonthalia believes consumption is a no-brainer for investors. “Price action hasn’t been visible yet, but earnings growth is set to improve,” he said.

He also sees wealth creation opportunities in platform companies, capital markets, construction, healthcare, pharma, and CDMO sectors over the next two to three years.

Overall, he maintains a constructive outlook for Indian equities, citing improving earnings, stable macros, and fair valuations that provide a cushion amid global uncertainties.