Indian equities were reportedly among the world’s best-performing markets in October, outperforming the broader Asia-Pacific region as investors shifted money away from AI-sensitive technology stocks and towards other sectors. The trend was also visible within India, where IT services stocks gained ground while companies linked to the AI ecosystem lagged, according to a Goldman Sachs Research report.The Nifty outperformed the broader Asia-Pacific region excluding Japan (MXAPJ) by 7 percentage points, reversing its underperformance during the first nine months of 2026.The change in investor preference was particularly sharp within India’s technology space. Stocks classified as AI enablers, which had beaten the Nifty by 76 percentage points between January and September, underperformed the benchmark by 6 percentage points in October. IT services companies moved in the opposite direction, outperforming the index by 14 percentage points to become the month’s leading sector.Goldman Sachs attributed India’s gains to a broader shift in global portfolios. “India benefited from market rotation away from AI-sensitive North Asian markets,” the report said, describing the country as one of the world’s best-performing markets in October, as cited by ANI.The recovery followed a difficult third quarter, when the Nifty had fallen 10 per cent from its peak to its trough. It recovered 3 per cent from its early-October low. Momentum continued in the week ended October 30, with the benchmark gaining 2 per cent against a 1 per cent rise in MXAPJ.The latest advance was not limited to large-cap stocks. Mid-cap and small-cap shares rose 3-4 per cent during the week, while pharmaceuticals gained 7 per cent. Financial stocks were relatively subdued, advancing just 1 per cent.Institutional flows also showed signs of improvement. Foreign institutional investors (FIIs) bought $1.2 billion worth of Indian equities during the week, although their net outflows for 2026 remained high at $31 billion. Domestic institutional investors (DIIs) added $400 million, taking their purchases for the year to $75 billion.Earnings have provided another source of support. Companies accounting for 58 per cent of the MSCI India index’s market capitalisation had reported their July-September results by the time of the report. Their combined profits were tracking 15 per cent higher than a year earlier and 13 per cent above the previous quarter.The performance, however, was uneven. Metals and mining, utilities and healthcare companies delivered more positive surprises, while cement and materials and consumer discretionary firms reported more earnings misses.The rally has also made Indian equities expensive relative to regional peers. The market’s forward price-to-earnings ratio stood at 18.4 times, while its valuation premium over the broader Asia-Pacific region reached 92 per cent, close to historical highs.With several large companies due to announce results in early November, investors will be looking for earnings to justify the market’s elevated valuations.
