India Regains Allure as Korea's AI Rally Fades, Trident Capital Says

The Rotation: From Korea’s AI Exhaustion to India’s Valuation Reset

The AI-powered market surge that propelled South Korean and Taiwanese stocks to new highs is showing cracks, and that is reviving foreign investor interest in India, according to Sachee Trivedi, founder and director of Trident Capital Investments. In an interview with Moneycontrol, Trivedi said the sharp volatility in Korea was not a broad-based advance but a concentrated bet on a handful of artificial-intelligence-linked names, amplified by heavy retail participation and leveraged derivatives positions. “Did Korea go too far on that theme? The answer is yes,” she stated, warning that FOMO-driven trades inevitably lead to episodic capitulations.

Meanwhile, India’s equity market, which had looked expensive in late 2024 at roughly 24 times forward earnings, has now corrected to around 20 times. In September 2024, South Korea and Taiwan were trading at single-digit valuations and thus drew a wave of foreign capital; that relative trade has now reversed. Trivedi argues that the valuation spread has narrowed enough to make India “very attractive” again, particularly because the post-pandemic era introduced a structural domestic buyer that did not exist a decade ago.

What the Shift Says About Crowded AI Trades and India’s Structural Buyer

Where Korea’s AI Trade Leaves It

The concentrated chase for AI exposure left Korean markets vulnerable. Because the rally was driven by a narrow group of stocks rather than broad economic strength, the reversal was amplified by retail leverage. Trivedi’s observation signals that foreign investors who piled into Korea for the AI theme may now face a painful unwind, making the case for rebalancing toward markets that offer a different risk-reward profile.

India’s SIP Floor and the Valuation Reset

A critical difference, according to Trivedi, is the structural inflow from systematic investment plans (SIPs) into Indian mutual funds. This steady domestic liquidity has “raised the floor” for Indian valuations, meaning that the market is less likely to revisit the low multiples of the past. While India at 20 times earnings is not cheap by historical standards, the presence of a reliable domestic buyer changes the calculus for foreign investors, who now face a market where drawdowns may be shallower and recoveries more durable.

The Switch in Relative Attractiveness

Trivedi frames the shift as a reversion in the relative trade. When Korean and Taiwanese markets were at single-digit valuations, the arbitrage was compelling; now that those markets have run up and India has corrected modestly, the pendulum has swung back. For global allocators, this means that the premium once demanded to hold Indian equities has been partly erased, while the momentum trade in AI-heavy Korean names is losing its grip.

Navigating the Post-Rotation Landscape for Global Investors

Trivedi’s analysis highlights several considerations for international investors reassessing their emerging-market exposure:

• The unwind of leveraged retail positions in Korea’s AI stocks could trigger further volatility; investors overexposed to that narrow theme may want to evaluate concentration risk.
• India’s forward valuation around 20 times looks more balanced against the recent rally in rival markets, and the structural SIP bid provides a cushion that was absent in earlier cycles.
• A rotation toward India is not a call on absolute cheapness but on relative value: the gap that made Korea and Taiwan irresistible in late 2024 has narrowed to a point where India’s growth and domestic liquidity story can again attract global flows.
• The shift also suggests that crowded consensus trades — in this case, chasing AI-exposed markets — can reverse rapidly, underscoring the importance of diversification across themes and countries.