India's stock market weakness is masking one of the country's strongest pockets of AI exposure. While the Nifty has declined 10.9% in 2026, a Goldman Sachs-screened basket of 42 Indian 'AI Enablers' has surged about 60%, making it the best performing segment of the market by a wide margin. The divergence challenges the dominant view that India has little to gain from the global artificial intelligence boom, as the country has increasingly become the default 'anti-AI' trade among major markets because its benchmark indexes have limited exposure to AI-related companies. According to Business Standard, this divergence comes as investors look beyond the benchmark after a weak year for Indian equities, with the gap between the Nifty and mid caps having widened sharply in 2026.
Goldman Sachs screened about 1,800 companies listed on Indian exchanges, representing a combined market value of around $5 trillion. After applying filters based on market size, liquidity, revenue growth, capex, research and development intensity, and management commentary on AI infrastructure, the investment bank identified 42 companies with a combined listed market value of $670 billion. The basket includes businesses involved in power generation, power transmission, power equipment, data centre development and operations, data centre hardware, semiconductor assembly and testing, semiconductor materials and semiconductor hardware. Notable companies include Adani Green Energy, Tata Power, NTPC Green Energy, ACME Solar, Clean Max Enviro Energy, Power Grid, Adani Energy Solutions, KEC International, ABB India, Cummins India, Siemens, Hitachi Energy India, GE Vernova T&D India, APAR Industries, Kirloskar Oil Engines, Schneider Electric Infrastructure, TD Power Systems, MTAR Technologies, Diamond Power Infrastructure, Waaree Renewable Technologies, Gujarat Fluorochemicals, Navin Fluorine, Himadri Speciality Chemical, Netweb Technologies, CG Power, Waaree Energies, Sansera Engineering, Kaynes Technology, Paras Defence, Polycab India, KEI Industries, Sterlite Technologies, HFCL, Blue Star, Craftsman Automation, Syrma SGS Technology, Reliance Industries, Bharti Airtel, Larsen & Toubro, Adani Enterprises, Anant Raj and Brigade Enterprises. The composition is notable with 12 large-cap, 9 mid-cap, 13 small-cap and 8 micro-cap companies among the 42 AI enablers, with capital goods accounting for 21 companies.
The rally has been broad-based across all three major layers of power, data centres and semiconductors, with gains between 40% and 80% in 2026. Six of the nine sub-layers have risen more than 20%, while all nine have outperformed the MSCI India Index. Data centre operators account for the largest share of the basket's total market value, at about $398 billion of the $670 billion total, followed by power equipment companies at $95 billion, power generation at $47 billion and power transmission at $45 billion. The next best performing pocket of the Indian market, healthcare, has gained only about 10% this year, and the AI-enabler basket has also outperformed the Nifty Midcap and Smallcap indexes, suggesting that its gains cannot be explained only by a broader rally in smaller companies. According to Business Standard, the strength in AI enablers has been quite broad-based, with all the 3 layers of power, data centres and semiconductors rallying 40-80% year-to-date, while nine out of nine sub-layers outperformed MSCI India.
Since 2025, the AI-enabler basket has returned 53%, with earnings growth contributing 65 percentage points while valuation compression reduced returns by 12 percentage points. Consensus estimates indicate that earnings for the AI-enabler basket could grow 53% in 2026, 39% in 2027 and 29% in 2028, compared with expected 2027 earnings growth of 16% for MSCI India and 14% for the MSCI India Small and Midcap Index. The biggest difference between the AI Enabler group and the broader market is visible in earnings revisions, with CY27 earnings estimates for the 42 companies rising 22% year to date, while estimates for the Nifty 500 have been cut 2%. Data centre hardware has led the upgrades with earnings estimates up 95%, followed by power equipment at 15% and semiconductor materials at 8%. Goldman Sachs estimates that AI Enablers could contribute around two percentage points to NSE 500 earnings growth in 2027 and 2028, and also estimates that the group could account for around 6 percentage points of NSE 500 capital expenditure growth in 2026.
The earnings momentum is being supported by a strong investment cycle, with Nifty 500 capex growth expected to more than double to 16% in 2026 from 7% in 2025, with AI enablers contributing about six percentage points to that increase. Goldman Sachs expects the companies to remain free cash flow positive despite higher capital spending. The AI theme is also appearing more frequently in corporate disclosures, with references to AI in management commentary having risen sharply over the past two years across technology companies and other sectors. Earnings calls increasingly include terms such as data centres, power purchase agreements, fibre infrastructure, transformers, switchgear, uptime, substations, GPUs, OSAT and data lakes, providing early indicators of investment and capacity expansion. According to Business Standard, the composition of AI enablers skews heavily towards small and mid-cap names and is concentrated in capital goods, utilities and tech hardware sectors, a combination largely inaccessible through cap-weighted benchmark indices. The pickup in corporate lending is also significant for the investment cycle, with stronger corporate credit indicating that the long-awaited private sector capital expenditure cycle is finally beginning to happen.
Despite the benchmark weakness, underlying economic indicators suggest India's structural growth story remains intact. Chris Wood's GREED & fear note at Jefferies highlighted that India's economic performance has been much stronger than expected, with bank credit growth of 19.1% year on year at the end of August, corporate loans up 21.6% in July and loans to micro, small and medium industrial enterprises rising 24.9%. Bank deposits also grew 17.8% year on year in August. The note expects India to look on track for 6.5% to 7% real GDP growth and around 11% to 12% nominal GDP growth in the current fiscal year. Jefferies' head of India research Mahesh Nandurkar expects the acceleration in nominal GDP growth to support a rise in MSCI India earnings growth from 14% this fiscal year to 17% next year, beginning April 1. Domestic investment flows remain strong with net inflows into domestic equity mutual funds averaging about ₹38,800 crore a month so far in 2026, though equity issuance has risen sharply with monthly supply reaching about $9.5 billion in August, absorbing some domestic liquidity.
