How long can Indian markets remain decoupled from global equity rout? Check what analysts say

Analysts warned that the global sell-off could eventually spread to Indian equities if foreign investors faced redemption pressures.

Stock market today news: Sensex, Nifty rise in trade.

Indian markets rose despite a global sell-off.

FIIs drove a strong rally with massive weekly inflows.

Falling crude prices supported the Indian equities.

Market Mastery

Webinar by Vishal Malkan

Find the weak links

in your portfolio by Vishal Malkan

The Indian equity markets continued to trade in positive territory on Monday, extending last week's rally even as global equities witnessed a sharp sell-off.Concerns over artificial intelligence (AI) spending and the outcome of the US elections triggered heavy selling in global markets, particularly in AI, semiconductor and data centre stocks, indicating a broader shift away from these sectors. In contrast, Indian markets emerged as a bright spot, rising more than 10 percent, while foreign institutional investors (FIIs) returned with their highest weekly inflows in more than a year.However, analysts cautioned that the trend could reverse just as quickly, with India's relative outperformance dependent on global market conditions and continued foreign fund inflows.Tanvi Kanchan, Associate Director at Anand Rathi Share and Stock Brokers, said India had not decoupled from global markets but had benefited from a rotation of funds within them."India has not decoupled from global markets so much as benefited from a rotation within them, and rotations can reverse just as fast. The S&P 500 fell 2.68 percent, its worst week since the April 2025 tariff crash, the Taiwan index had its steepest weekly fall in two decades, and both Japan and Taiwan slipped into bear markets," she said."Over the same week, the Nifty rallied for seven straight sessions to close at 25,030 on Friday. Foreign investors put roughly Rs 46,000 crore into Indian equities during the week, including Rs 13,750 crore on Friday alone, as Indian markets became an AI contrarian strategy and benefited directly from falling crude prices," she added.Kanchan said the biggest risks to the ongoing rally were crude oil prices, developments in US-Iran talks, the US Federal Reserve's interest rate outlook and market valuations."Brent has fallen from the USD 110 levels to around USD 95-96, which is the single biggest support for India's currency, inflation and earnings. Any breakdown in US-Iran talks would undo that quickly. We are also looking at the Fed. A strong US jobs report has pushed the odds of a December rate hike to around 80 percent, and the dollar just had its biggest one-day gain in five months," she said.The sharp correction in crude oil prices has also supported sentiment towards Indian equities, given the country's dependence on oil imports.Analysts said the decoupling could continue as long as the global weakness remained largely confined to a rotation away from AI and US technology stocks.Hariselvan Radhakrishnan, Founder and CEO of HST Wealth, a SEBI-registered research analyst firm, said India's resilience was relative rather than absolute."Indian benchmarks have little direct exposure to the AI hardware names driving the global sell-off, the fall in crude is a genuine macro positive for an oil importer like India, and global funds that were heavily underweight India have been rotating money back in," he said.He cautioned that the global sell-off could eventually spread to Indian equities if foreign investors faced redemption pressures."Decoupling can hold as long as the global weakness remains a rotation out of AI and US technology. In that scenario, global funds facing redemptions tend to sell what is liquid, and Indian large caps are among the most liquid assets in emerging markets. Foreign selling could then reach domestic sectors even where earnings are unaffected," he said.Radhakrishnan said India had not escaped previous global market downturns, including those in 2008 and 2020. Instead of putting a timeline on the current trend, investors should monitor foreign fund flows, crude oil prices and the breadth of the market rally, he added.He said continued foreign buying in the cash market on days when Wall Street declines, crude prices remaining below USD 100 a barrel and a broader rally beyond large-cap stocks would be important indicators of the market's resilience."Steady domestic SIP flows provide a cushion, but they cannot fully offset sustained foreign selling," he added.Foreign investors have purchased Indian shares worth around Rs 37,000 crore in November so far. This is already their biggest monthly inflow since September 2024.Ponmudi R, Founder and CEO of Enrich Money, said Indian markets could remain insulated from the global sell-off for some time, but the trend was unlikely to continue indefinitely."India can remain decoupled from the global sell-off for some time, but not indefinitely. AI valuations may drive market corrections, while real earnings, domestic consumption and human purchasing power will determine long-term market strength," he said.The Indian benchmark indices had gained around 10.5 percent in seven consecutive trading sessions through Friday, marking their longest winning streak so far this year. The rally was supported by strong foreign fund inflows, easing crude oil prices and the unwinding of the global AI trade.

Meanwhile, on Sunday, benchmark indices Sensex and Nifty had ended marginally lower during the special Muhurat trading session marking the beginning of Samvat 2083, as investors booked profits following a seven-session rally.

"With last week’s spectacular fireworks which saw the Nifty boom by 8.6%, the market sentiments have turned for the better. A rare convergence of positive news for India - FIIs turning aggressive buyers, fair valuations, winding down of AI trade, dip in crude price, decline in US bond yields and steadily improving corporate earnings as reflected in Q2 numbers- triggered the rally. When the situation turns favourable, the market needs only a trigger to rally. This trigger was provided by the Democrat’s victory in the US elections, which, in turn, caused fears of deceleration in AI spending and sharp correction in AI stocks.

"The FII buying in India is likely to sustain paving the way for further rally in large-caps. It is important to understand that FII allocations track index weights during major market shifts," said V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

Paras Bisht A financial journalist with over 10 years of experience, specialising in tracking stock market movements and fundamental developments that impact investors and the broader economy. A keen observer of global financial markets, I regularly engage with leading market voices to write stories. At Moneycontrol, I focus on decoding market trends, policy shifts and economic changes, driven by a constant passion to learn, analyse, and share knowledge with my readers.

Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!