India's benchmark Nifty 50 index has fallen 13% in 2026, putting it on track for its worst year since 2011, while MSCI's emerging markets index has gained more than 18% so far this year. According to reports from The Economic Times, half of the top 10 gainers on India's broader Nifty 500 index this year are linked indirectly to AI, highlighting investor appetite for companies supplying the infrastructure needed to support the technology. This stark contrast underscores the limited direct AI beneficiaries in India's listed market, with analysts noting that "AI requires a huge amount of physical infrastructure, including electricity, transmission equipment, fibre connectivity, cooling, and data centres," as Rita Tahilramani, investment director of Asian equities at Aberdeen Investments, explained. The gap is particularly pronounced as India lacks listed companies such as TSMC or Samsung that make advanced chips critical to frontier AI models, creating scarcity value for infrastructure suppliers.
Sterlite Technologies shares have surged 804% this year, making it the Nifty 500's top performer, as reported by The Economic Times. Other standout gainers include telecom equipment and optical fibre maker HFCL, MTAR Technologies, Syrma SGS, and TD Power Systems, which have all added between 123% and 287% in 2026. Analysts at Nomura noted that "robust data center addition and constrained supply is driving optical fibre cable demand supercycle," with the magnitude of share-price moves partly reflecting the scarcity value of these exposures in an Indian market with relatively few direct AI beneficiaries. Naomi Waistell, fund manager at Carmignac, emphasized that "the magnitude of the share-price moves partly reflects the scarcity value of these exposures in an Indian market with relatively few direct AI beneficiaries." The sector has expanded beyond traditional players to include APAR Industries, Finolex Cables, and Azad Engineering, which make cable and conductor products and turbine blades for power generation, demonstrating the broad-based demand for AI infrastructure components.
Foreign investors have increased their stake in the Nifty 500's top 10 AI-linked gainers to 13.6% at the end of June quarter, compared to 10.3% last year, according to exchange data reported by The Economic Times. Mutual funds also raised their stake to 11.8% from 11.5% during the period. However, foreign investors have sold a record $32.52 billion of Indian equities this year due to concerns over valuations and the gap in direct AI beneficiaries compared to markets like South Korea and Taiwan. As per primeinfobase.com, this trend reflects investor caution over potentially inflated valuations in the AI infrastructure sector, with some analysts expressing concern that "high valuations are the major risk, especially in cases where near-term growth is extrapolated to long-term projections."
India's data centre capacity could nearly quadruple from 1.6 GW in mid-2026 to 6 GW by 2029, according to real estate services firm JLL, as reported by The Economic Times. Global hyperscalers are committing more than $50 billion to build 1.4 GW of capacity in the country by then. Companies tied to data centres, fibre networks and power infrastructure have bucked the broader market trend, with suppliers increasingly winning large orders from these customers and for exports of optical fibres, fuel cells, and related equipment. Power-related firms have also benefited as investors account for the impact of energy-hungry technology, with CG Power and Adani Power among the biggest gainers on the Nifty Infrastructure index this year. Swagatam Biswas, head of public equities at Avendus Wealth Management, noted that "one can build in higher power generation and consumption estimates and play the power producers and transmission companies."
Despite the strong performance, experts warn that stretched valuations mean any slowdown in AI spending could bite, according to The Economic Times. Gaurav Narain, principal adviser to India Capital Growth Fund, noted that high valuations are the major risk, especially in cases where near-term growth is extrapolated to long-term projections. Companies like HFCL secured a five-year contract worth up to $1.1 billion from a global hyperscaler in March, while Sterlite signed supply agreements potentially worth more than $2 billion combined this year, demonstrating the scale of infrastructure demand in India's AI boom. Black Box also won a $131 million data-centre order from a US-based hyperscaler, highlighting the growing opportunities for Indian suppliers in the global AI infrastructure market. The sector's performance reflects the scarcity value of AI infrastructure exposure in India's market, where direct beneficiaries remain limited compared to markets with advanced chip manufacturing capabilities.
