BofA Securities remains optimistic about AI's impact on Indian IT services, with Kunal Tayal, Director of Equity Research, stating that AI will create new revenue opportunities for Indian IT services firms over the next few years. Speaking to ET Now, Tayal emphasized that "it is really on the business process side where IT services companies should find a new total addressable market." He noted that partnerships between AI platform providers and major IT services firms indicate that service providers will remain an integral part of the AI ecosystem rather than being displaced by it. Another major opportunity could emerge from technology modernization, as AI reduces the cost of implementing technology projects, potentially accelerating digital transformation initiatives and creating additional demand for IT consulting and implementation services.
India is positioning itself for a new wave of outsourcing opportunities in physical AI data services, building on its established strengths in IT and business process management. According to Business Standard, the country's diversity of physical environments, ranging from hospitals and pharmaceutical facilities to logistics hubs and corporate campuses, makes it an attractive training ground for robotics companies. Manish Mamtani, chief information officer at Compass Group India, confirmed that physical AI is no longer a future concept but technology already being deployed in live environments, including autonomous cleaning robots, AI-driven kitchen environment controls, and camera-based safety monitoring across India. The AI data services market could grow substantially by the end of the decade, though experts note it would remain far smaller than India's IT exports business. Jaspreet Bindra, founder of AI advisory firm AI&Beyond India, argues that physical AI data can evolve into a large outsourcing category because embodied AI systems require complex multimodal data rather than simple image or text annotation.
India faces a structural disadvantage in the artificial intelligence age, according to Nirav Sheth, CEO of Institutional Equities at Emkay Global Financial Services. Speaking to ET Now, Sheth warned that "the biggest problem that we face as a country is that you are on the wrong side of the AI trade." The latest developments show foreign investors are chasing AI growth abroad, directly impacting Indian markets and highlighting the country's positioning challenges in the global AI trade. Global AI-led market shift is driving massive foreign capital outflows from India toward East Asia's technology hubs, with overseas investors pulling nearly $24 billion from Indian equities this year. Fueled by the AI boom and a sharp rally in Taiwan Semiconductor Manufacturing Company, Taiwan has overtaken India as the world's fifth-largest stock market, while South Korea is emerging as another strong challenger. Geopolitical risks and rupee depreciation add to macro concerns, creating additional headwinds for Indian markets.
The physical AI data services market presents a complex value chain with multiple revenue streams. According to industry experts, at the bottom of the value chain sit households, gig workers, factory operators, and field workers generating the raw data, while startups collect, clean and annotate information. Companies building compliance systems, simulation environments, quality assurance layers, and deployment infrastructure sit higher up the chain, with robotics companies, manufacturers, AI developers, and cloud providers using the data to train and improve machines at the top. Manish Mohta, founder of Learning Spiral AI, argues that companies managing the entire lifecycle - from data collection and governance to annotation, testing, and deployment - would capture significantly higher margins than pure annotation providers. Anuj Chahal, founder & CEO of Maverick Simulation Solutions, believes simulation engineering and robotics validation services could become important revenue pools as global companies seek safer ways to train autonomous systems. The potential customers extend far beyond robotics startups, with enterprise demand coming from global robotics developers, manufacturers adopting smart-factory systems, warehousing and logistics companies, automakers, and defence technology providers.
Policy consistency is a major concern for global funds, with experts urging India to rethink taxes like STT and LTCG to boost investor confidence and market stability. While domestic investors provide support, foreign capital remains vital for growth. Sheth noted that Q4 results are broadly ahead of expectations across autos, banks, and cement, but cautioned that these are backward-looking indicators. His current projection for Nifty earnings stands at high single-digit growth for FY27. Emkay Global expects the Nifty to hit 29,000 by CY2026, supported by stronger consumption, softer interest rates, stable policy and rising affordability. The brokerage is bullish on Consumer Discretionary, Industrials, Healthcare and Materials, while remaining cautious on Financials, Staples, IT and Telecom. Despite current challenges, Morgan Stanley remains bullish on Indian equities, citing an earnings upcycle, supportive macroeconomic conditions and strong domestic flows. The brokerage projects the Sensex could reach 89,000, supported by robust earnings growth and improving market fundamentals.
