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India’s Nifty Falls as AI Enablers and Midcaps Surge
India’s main stock index, the Nifty, has had a difficult year.
However, some smaller and medium-sized companies have performed much better.
Goldman Sachs found 42 companies connected to artificial-intelligence infrastructure whose shares rose about 60%.
These companies help provide electricity, data centres, equipment and semiconductor materials.
Chris Wood of Jefferies says India’s economy is still growing steadily.
Banks are lending more money to businesses, including smaller companies.
This could help businesses invest and increase their earnings.
The AI-related companies are expensive, but their expected profits have been rising faster than those of the wider market.
The Nifty has fallen 10.9% in 2026, while the Nifty Midcap 100 has gained 1.5%.
Goldman Sachs’ 42-company AI Enabler basket has risen about 60% this year.
The basket spans power, data centres, semiconductors and related infrastructure companies.
Jefferies’ Chris Wood says strong credit growth and domestic demand support India’s structural growth story.
AI Enablers trade at high valuations but have received major earnings upgrades, unlike the broader Nifty 500.
- Who
- Goldman Sachs and Jefferies’ Chris Wood assessed different areas of India’s equity market.
- What
- The Nifty declined while midcaps and Goldman Sachs’ AI Enabler basket gained strongly in 2026.
- Where
- India’s equity market.
- When
- During 2026, with Goldman Sachs’ cited report dated September 17 and credit data reported through August.
- Why
- Strong credit growth, domestic investment and rising earnings expectations are supporting selected companies despite weakness in the benchmark index.
Growth Opportunity
Valuation and Market Risks
Economic outlook
Growth Opportunity
Chris Wood says resilient domestic demand, strong bank lending and potential private-sector capital expenditure support India’s structural growth story.
Valuation and Market Risks
The benchmark remains weak, and strong domestic liquidity is being partly absorbed by a sharp rise in equity issuance.
AI infrastructure prospects
Growth Opportunity
Goldman Sachs says AI Enablers have visible revenue opportunities, rising earnings estimates and projected growth well above MSCI India.
Valuation and Market Risks
The basket has already rallied sharply, and Goldman Sachs noted that earnings estimates were cut for data-centre developers and power-generation companies.
Valuations
Growth Opportunity
The basket’s PEG ratio is 1.3, slightly below MSCI India’s 1.4, suggesting its premium is partly supported by faster earnings growth.
Valuation and Market Risks
At 36 times forward earnings, the basket is at an approximately 85% premium to MSCI India and near the upper end of its five-year valuation range.
Key facts
- Nifty performance
- Down 10.9% year to date in 2026; Goldman Sachs cited a 12% decline in its September 17 report.
- Nifty Midcap 100
- Up 1.5% in 2026 and up 95% since the beginning of 2023.
- AI Enabler basket
- 42 Indian companies with a combined listed market value of $670 billion; up about 60% in 2026.
- AI infrastructure areas
- Power, data centres and semiconductors, including related equipment and materials.
- Credit growth
- Bank credit grew 19.1% year over year at the end of August; corporate loans rose 21.6% in July.
- Expected AI Enabler earnings growth
- Goldman Sachs estimates 53% in 2026, 39% in 2027 and 29% in 2028.
- AI Enabler valuation
- The basket trades at 36 times forward earnings, about an 85% premium to MSCI India.
Quotes
Chris Wood
Jefferies GREED & fear research author and market analyst
“From a stock market standpoint GREED & fear continues to believe, as previously discussed here, that the mid and small caps are the most interesting part of the market given the huge reservoir of entrepreneurial talent”
financialexpress.com
Goldman Sachs
Global investment bank and research publisher
“Beneath the surface of a laggard benchmark, a distinct and rapidly compounding pocket of AI-infrastructure beneficiaries, predominantly mid, small and micro-cap companies, is delivering some of the strongest equity returns in India.”
financialexpress.com
Sources
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