Flows

• Foreign investors recorded net sales of Asian equities in July, marking the ninth consecutive month of outflows from the region. • Heavy selling was concentrated in Taiwan and South Korea, driven by investor anxiety regarding artificial intelligence spending and semiconductor demand. • This trend highlights a growing volatility in technology-heavy markets as the initial AI-driven rally faces scrutiny over long-term profitability.

• India is re-emerging as a strategic "anti-AI" portfolio diversifier for global investors who are currently heavily concentrated in AI-linked markets like South Korea and Taiwan. • Recent market resilience is supported by $3.6 billion in foreign inflows, moderating long-only fund redemptions, and strong domestic contributions via Systematic Investment Plans (SIPs). • This shift matters as it provides a hedge against AI-sector volatility, with a potential $25 billion reallocation expected from underweight emerging market funds.

• The Indian stock market ended the previous week with solid gains, with the Nifty 50 rising 0.53% to 24,334.30 and the Sensex advancing nearly 0.75% to 78,151.45. • Positive momentum was driven by strong domestic economic fundamentals, fresh buying in financial stocks, and better-than-expected Q1 FY27 earnings from the IT sector, particularly TCS. • These gains are significant as they establish a bullish baseline ahead of a new week of trading influenced by both domestic and global factors.

• Foreign investors injected a net $11.51 billion into the bond markets of South Korea, Indonesia, Malaysia, Thailand, and India in June. • This surge represents the strongest monthly inflow since November 2025, driven by falling oil prices and a booming global tech cycle. • The shift occurred as equity market volatility pushed investors toward the relative safety of sovereign debt and improved regional economic outlooks.

• The Star Market 50 Index experienced a 10% decline over a two-week period, signaling a sharp pullback in Chinese technology stocks. • Analysts from UBS and HSBC Jintrust characterize this drop as a "temporary blip" rather than a long-term trend. • Market stability is expected due to strong earnings reports from AI companies and a growing trend of global investors diversifying into Chinese assets.

• Indian large-cap stocks are projected to rebound and narrow their underperformance relative to mid- and small-cap peers. • The recovery is driven by a return of foreign investors, more palatable valuations, and stronger earnings visibility compared to smaller companies. • This shift follows a period where Indian stocks lagged behind US and Asian markets, such as South Korea and Taiwan, which surged due to AI exposure.

• Indian stock markets climbed during early trade, driven primarily by significant inflows from foreign funds. • Major gainers included tech and consumer giants such as Titan, Infosys, Tech Mahindra, HCL Tech, and Tata Consultancy Services, while Larsen & Toubro saw declines. • This positive domestic momentum contrasts with a sharp downturn in Asian markets, where South Korea’s Kospi plummeted 7% and indices in Japan, Shanghai, and Hong Kong also traded lower.