For much of this year, Indian equities have looked like the market global investors forgot. Reuters reported that the Nifty was still down 4.2 per cent in 2026, against a 7 per cent gain for the MSCI Emerging Markets index. Monday's opening suggested how quickly that story may be changing, and the reason lies partly in the troubles of the world's hottest trade.

Sensex gained 327.89 points, or 0.4 per cent, to open at 81,327.29, while Nifty rose 90 points, or 0.36 per cent, to 25,076.40. The move came on top of a remarkable week in which the Nifty surged 8.6 per cent. That was its strongest weekly showing since February 2021, with the Sensex adding 8.8 per cent and both indices closing Friday on a seven-session winning run.

The sector split in early trade told its own story. Financials did the heavy lifting, with Nifty Financial Services 25/50 up 0.57 per cent, Nifty PSU Bank up 0.47 per cent and Nifty Private Bank up 0.37 per cent. Nifty Healthcare rose 0.35 per cent, while Nifty Metal and Nifty Pharma added 0.33 per cent and 0.24 per cent, respectively. Technology was the outlier: Nifty IT declined 0.47 per cent and Nifty MidSmall IT & Telecom fell 0.39 per cent.

Why the AI scare matters on Dalal Street

Market experts said last week's rally rested on a rare convergence of favourable factors: aggressive FII buying, attractive valuations, easing crude oil prices, declining US bond yields and improving corporate earnings in the second-quarter results. They also pointed to a less obvious driver. Worries about a slowdown in artificial intelligence spending, along with a sharp correction in AI-related stocks, have helped alter global market dynamics.

That matters because India has few large listed plays on the AI hardware boom, so a retreat from that trade can make its market look relatively attractive. Asia offered a reminder of the other side of the coin, as concerns over chip demand triggered sharp losses across technology-heavy markets last week before US equity futures and Asian markets edged higher on Monday.

The experts expect FII buying in India to continue, potentially paving the way for further gains in large-cap stocks. They added that foreign investor allocations tend to track index weights during major market shifts, which helps explain why heavyweight financials are at the front of this move.

The global backdrop, and the test ahead

Overnight cues were supportive. US equities ended higher in the previous session, with the Nasdaq gaining 1.09 per cent and the S&P 500 advancing 0.31 per cent. Crude oil prices opened lower on Monday after President Trump's indication on Iran, a meaningful relief for a large oil importer like India.

The harder question is durability. A rally built on foreign flows can reverse as fast as it arrives, and both the Iran talks and the AI correction remain moving targets. For now, the market's message is that money is coming back, and it is heading first to India's banks rather than its software exporters.