India continues to be a crucial market for emerging investors, despite experiencing what some analysts call a “reverse AI trade,” which has reduced its position in the MSCI Emerging Markets Index to 12 percent, as reported by Jefferies in its Greed & Fear report.
The report notes, “If India has faced challenges due to the reverse AI trade, it has not been completely marginalized from the benchmark relevance that emerging market investors rely upon—a concern that now looms over Asean markets.”
According to the findings, Indian mid-cap stocks have shown considerable resilience, demonstrating a rally that surpasses the broader market performance, even amid significant foreign capital outflows.
The report emphasizes that while global focus has shifted toward semiconductor-related stocks, Indian mid-cap shares have rebounded well, increasing by 19.2 percent from a recent intraday low of April 2, culminating in a peak of 62,094 for the Nifty MidCap 100 Index.
In contrast, the blue-chip Nifty 50 Index rose only 9.7 percent from its April low, remaining 7.8 percent below its January peak. Since the beginning of 2023, the MidCap Index has surged by 97 percent, overshadowing the 34 percent increase seen in the Nifty Index.
This upward trend in mid-cap stocks is notable despite foreign selling, which has reached a net total of $21.1 billion year-to-date. This figure already surpasses the previous record of $18.8 billion net selling for all of last year.
The report states, “This mid-cap segment remains the most intriguing part of the Indian market to GREED & fear, though the recent rally has rendered these stocks relatively expensive again.”
Domestic equity mutual fund inflows have played a critical role in mitigating the impact of foreign selling, with inflows accelerating to ₹500 billion in March—marking an eight-month high. Systematic Investment Plans (SIPs) accounted for ₹321 billion of this amount, while the National Pension Scheme contributed around $1.7 billion per month to equities during the first quarter of 2026.
The shift in foreign investment interest is attributed to changing weightings in the MSCI Emerging Markets Index. India’s weighting decreased from 19.5 percent to 11.5 percent since the start of the previous year, while the weightings for Korea and Taiwan increased to 20.6 percent and 25 percent, respectively.
The report also highlights a significant disparity in profit forecasts, citing that Samsung and Hynix are projected to earn a combined W452 trillion ($307 billion) this year, vastly outpacing the $102 billion forecasted for India’s Nifty 50.
As a consequence of these adjustments, the Asia Pacific ex-Japan relative-return portfolio has seen a one-percentage-point reduction in India’s weighting to 12 percent, while the weights for Korea and Taiwan have increased to 18 percent and 21 percent, respectively.
Published on May 9, 2026
