Table of Contents 

1. The Strategic Case for Indian IT & Global AI

2. Five Investment Routes to Play Global AI

3. Direct Large-Cap IT Stock Picks

4. Nifty IT Index Funds and ETFs

5. Global AI ETFs via India-Domiciled Funds

6. Direct US Stock Investment via LRS

7. Indian Brokers Offering US Stock Access

8. Comparative Analysis: Which Route is Best?

9. Valuation and Risk Considerations

10. The Verdict: Layered Investment Approach

11. Actionable Next Steps

The Strategic Case: Why Indian IT Captures Global AI Growth

The $2.4 trillion artificial intelligence opportunity unfolding globally has sparked intense competition for exposure. Yet many Indian retail investors face a critical question: How can I gain meaningful exposure to global AI trends without investing in expensive US stocks? The answer lies in an often-overlooked avenue-India's IT services sector, which has positioned itself as the critical execution layer for enterprise AI transformation worldwide.

Indian IT companies serve as the transformation layer: they integrate AI into client operations, build custom solutions, automate workflows, and scale implementations from proof-of-concept to revenue-generating systems. This positioning creates high-leverage opportunities, particularly given current global outsourcing patterns and the imminent acceleration in enterprise AI spending.

Why the Outsourcing Model Matters

The Data Speaks for Itself:

• India's IT outsourcing market is projected to reach $20.81 billion by 2029, growing at 13.52% CAGR from 2024 onwards, driven explicitly by AI development offshoring

• 59% of American companies outsource IT work to India

• US firms are now building AI-first Global Capability Centers (GCCs) in India, fundamentally elevating the value proposition beyond simple cost arbitrage

• AI development outsourcing to India shows a CAGR of 13.52% through 2029

The Three-Part Thesis for Indian IT's AI Advantage

First: Monetization Already Underway

Indian IT companies have begun monetizing AI at meaningful scale. Tata Consultancy Services (TCS), India's largest IT exporter, reported $1.8 billion in annualized AI revenue run rate in Q3 FY26, representing 5.8% of its total revenue, growing 17.3% quarter-on-quarter. Infosys posted 9% year-on-year revenue growth driven explicitly by AI and cloud transformation deals, while HCL Technologies disclosed advanced AI revenue of $146 million, growing 19.9% sequentially.

Second: Shift from Pilots to Scaled ROI

Enterprise adoption of AI is transitioning from pilot projects to return-on-investment-led implementations at scale. This shift unlocks substantially higher-value contracts and stickier client relationships-a critical inflection point for IT services margins. K Krithivasan, Chief Executive of TCS, noted: "If you really look at 2025, the adoption in our customer landscape has significantly increased, where we have now shifted from experiment PoCs and pilots to really ROI-led, scaled implementations."

Third: Valuation Gap Creates Opportunity

Foreign investors withdrew $17.5 billion from Indian equities in calendar year 2025 (highest annual outflow on record), citing superior opportunities in AI-exposed markets like the US and East Asia. However, this capital flight has left Indian IT stocks trading at reasonable valuations while they capture an increasingly valuable slice of global AI spending. TCS trades at a P/E of 22.39, while Infosys trades at 23.62-modest multiples for businesses accelerating at 15%+ AI revenue growth rates.

Five Routes to Play Global AI via Indian Stocks and ETFs

Route 1: Direct Large-Cap IT Stock Picks

Best for: Investors with conviction on individual companies, seeking dividend income + capital appreciation

For investors with conviction on individual companies, direct equity ownership in India's IT giants provides pure-play exposure to AI revenue acceleration and offers several strategic advantages over index-based approaches.

TCS (Tata Consultancy Services)

Why it matters: TCS is India's largest IT services exporter with a $1.8B AI revenue run rate growing at 17.3% quarter-on-quarter. The company has executed over 5,500 AI projects and works with most of its top clients on AI initiatives.

Key Metrics (January 2026):

• Market Cap: ₹11,44,401 crore

• P/E Ratio: 22.39

• ROCE: 64.63%

• AI Revenue Run Rate: $1.8 billion (5.8% of total revenue)

• AI Revenue Growth (QoQ): 17.3%

• Dividend Yield: ~1.9%

Investment Angle: TCS offers scale, established AI momentum, and proven capital efficiency. Trading at a reasonable P/E relative to its 17%+ AI growth rate, TCS is suitable for conservative investors seeking large-cap stability with emerging growth catalysts.

Infosys

Why it matters: Infosys delivered $3.1 billion in total contract value wins in Q3 FY26, with strong net-new deal contribution and AI-driven revenue growth. The company's Services.AI and Client.AI stacks are scaling meaningfully, delivering productivity gains of 40-50% in select workflows.

Key Metrics (January 2026):

• Market Cap: ₹6,81,672 crore

• P/E Ratio: 23.62

• ROE: 28.8%

• ROCE: 37.5%

• TCV (Total Contract Value): $3.1 billion

• Dividend Yield: ~2.6%

Investment Angle: Infosys combines stable growth with attractive returns on capital and cash generation. Ideal for income-focused investors seeking stable dividends alongside capital appreciation.

HCL Technologies

Why it matters: HCL raised full-year revenue growth guidance to 4.0%-4.5% in constant currency despite macro headwinds. Advanced AI revenue crossed $146 million in Q3 FY26, representing nearly 3% of revenue across 47 client accounts, with AI growth of 19.9% quarter-on-quarter.

Key Metrics (January 2026):

• Market Cap: ₹4,65,882 crore

• P/E Ratio: 27.14

• AI Revenue: $146 million (3% of total revenue)

• AI Revenue Growth (QoQ): 19.9%

• FY26 Revenue Guidance: 4.0%-4.5% constant currency

Investment Angle: HCL's mid-size positioning offers higher growth potential than TCS or Infosys, though at a steeper valuation. Suitable for growth-oriented investors with 5+ year time horizons.

Mid-Cap IT Alternatives

For risk-tolerant investors seeking higher volatility and growth potential:

• Persistent Systems: P/E 60.99; strong engineering R&D orientation with niche AI applications

• LTIMindtree: P/E 36.68; 28.57% quarterly profit growth; specialized digital transformation focus

• Tech Mahindra: P/E 35.01; domain expertise in select verticals and telecom

Caveat: Mid-cap names command premium valuations reflecting higher growth expectations. Best suited for experienced investors comfortable with 20-30% annual volatility.

Route 2: Nifty IT Index Funds and ETFs

Best for: Passive investors, SIP approach, those avoiding individual stock risk

For investors seeking diversified exposure without individual stock-picking risk, index funds tracking the Nifty IT Index provide efficient sector exposure at minimal cost.

Nifty IT Index Composition

The Nifty IT Index comprises India's 10 largest IT services firms with the following weighting (January 2026):

Index P/E: 26.9 (as of January 2026)

Best Nifty IT Index Funds

Axis Nifty IT Index Fund

• Expense Ratio: 0.32% (direct growth plan)

• Minimum SIP: ₹100

• Best For: Cost-conscious SIP investors

• How to Buy: Groww, Zerodha, Angel One, Axis Direct

Nippon India ETF Nifty IT

• Expense Ratio: 0.33%

• Format: Exchange-traded (real-time pricing, intraday trading)

• Minimum Investment: ₹1,000 (requires demat account)

• Best For: Active traders seeking intraday flexibility

Why Index Approach Works

• Eliminates individual stock risk: Portfolio naturally rebalances toward largest, most liquid names

• Minimal cost drag: 0.32% expense ratio over 30 years costs only ~1% in real cumulative returns vs. 1.5%+ for actively managed funds

• Automatic diversification: Exposure to 10 large-cap IT names without research overhead

• SIP-friendly: Start with ₹100/month; compound over 10-20 years for significant wealth creation

Route 3: Global AI ETFs via India-Domiciled Funds

Best for: Investors seeking direct US AI exposure without LRS paperwork

India-domiciled mutual funds investing in US-listed AI ETFs offer the simplest route to holding diversified global AI exposure, avoiding LRS complexity.

Mirae Asset Global X Artificial Intelligence & Technology ETF (Fund of Fund)

• NAV (as of Jan 16, 2026): ₹27.90

• Underlying Exposure: Nvidia, AMD, Microsoft, Google, Tesla, Broadcom, Qualcomm, and 40+ AI-adjacent companies

• Expense Ratio: 0.85% (0.35% underlying ETF + 0.50% fund-of-fund layer)

• Minimum SIP: ₹500

• How to Buy: Any mutual fund distributor (Groww, Kuvera, ET Money, direct from Mirae Asset)

Why It Works:

• No LRS form submission required

• Rupee-denominated entry and exit

• Tax treatment aligns with domestic equity funds (12.5% LTCG after 1 year)

• Instant diversification across global AI ecosystem

Complementary Global ETF Vehicles

Motilal Oswal Nasdaq 100 ETF

• Tracks top 100 US tech companies (60% concentration in mega-cap tech and AI)

• Expense Ratio: 0.45%

• Best for: Broader US tech exposure beyond pure AI

Kotak Nasdaq 100 Fund of Funds

• Similar to Motilal but with Kotak's fund management overlay

• Slightly higher fees but strong track record

Route 4: Direct US Stock Investment via Liberalized Remittance Scheme (LRS)

Best for: Serious allocators seeking global portfolio diversification, ₹15L+ to deploy

The LRS Framework: India's Reserve Bank permits resident individuals to remit up to $250,000 per financial year abroad for investments. This is a one-time per-calendar-year limit for Indian residents.

How to Invest via LRS

1. Approach your bank: HDFC, ICICI, Axis, Kotak, or any authorized bank

2. Complete Form A2: Specify "investment in shares abroad" as remittance purpose

3. Provide investment details: Exact shares/ETF names, quantities, broker account

4. Bank handles conversion: Currency conversion at prevailing rates

5. Settlement: Funds arrive in your overseas brokerage (typically 3-5 business days)

Recommended US Brokers for Indians:

• Interactive Brokers (IBKR) - lowest fees, wide product access

• Charles Schwab - user-friendly, good for beginners

• Fidelity - strong reputation, excellent customer service

AI Investment Vehicles via LRS

Semiconductor Stocks (Direct AI Hardware Play)

• Nvidia (NVDA): Dominant GPU supplier for AI training/inference; P/E 40+

• AMD (AMD): Strong competitor in data center GPUs; P/E 35+

• Broadcom (AVGO): Networking silicon for AI infrastructure; P/E 45+

Cloud & AI Platform Companies

• Microsoft (MSFT): 45% of Azure revenue from AI services; P/E 35

• Google/Alphabet (GOOGL): Leading in AI research + cloud AI services; P/E 28

• Amazon (AMZN): AWS AI services growing 35% YoY; P/E 42

AI-Focused ETFs (Recommended for most investors)

Tax & Logistics via LRS

Best Practice: Ideal for deploying ₹15L+ at a time to optimize after-tax returns. Multiple ₹7L remittances per year can be structured to minimize TCS impact.

Route 5: Indian Brokers Offering Direct US Stock Access

Best for: Tech-savvy traders seeking simplicity without LRS paperwork

A newer model has emerged whereby Indian stock brokers partner with US brokers to offer Indians direct access to US stocks and ETFs without formal LRS complexity.

Key Players

Advantages vs. Traditional LRS

• No LRS form submission or bank paperwork

• Simple onboarding (same app as domestic stocks)

• Rupee entry/exit via domestic bank account

• Real-time monitoring of US portfolio

Disadvantages

• Less favorable currency spreads than bank-mediated LRS

• Exposure to broker operational/regulatory risk

• Limited settlement flexibility compared to direct US brokers

Best for: Smaller allocations (₹50K-₹5L) where convenience outweighs savings from better FX rates.

Comparative Analysis: Which Route Suits Your Profile?

Valuation and Risk Considerations

Valuation Backdrop: Why Now Is Attractive

The Case for Indian IT Valuations:

• Nifty IT Index P/E: 26.9 (Jan 2026)- appears steep on current earnings, but…

• Forward earnings growth: 16% CAGR FY26-28 (vs. 7% prior two years)

• TCS P/E: 22.39 - attractive relative to IT median, given 17%+ AI growth

• Infosys ROE: 28.8% and ROCE: 37.5% - among India's highest capital efficiency metrics

• Deal momentum: Nifty IT median TCV growth ~26% YoY despite macro caution

The Earnings Recovery Play:

When Nifty IT earnings accelerate 16% CAGR in FY27-28 (as consensus expects), current valuations will appear cheap. Foreign investors currently favoring US/East Asia names due to macro uncertainty and superior direct AI exposure may re-enter Indian equities once earnings visibility improves.

Key Risks to Monitor

1. Global Capital Allocation Risk

Risk: Foreign investors favor emerging markets with direct AI infrastructure exposure (semiconductors, cloud in US and East Asia) over India's service-layer positioning.

Mitigation: This preference could persist if global macro deteriorates. However, Nifty earnings recovery in FY27-28 should attract rotational flows, especially if India's macro backdrop remains stable (7.5% real GDP growth, sub-1% current account deficit, manageable inflation).

Monitoring Point: Track quarterly FPI flows and foreign investor commentary on India valuations vs. earnings growth.

2. Margin Compression from Labour Codes

Risk: While AI projects carry higher margins than legacy outsourcing, wage pressures and new labour code provisions (₹3,100 crore provisions in Q3 alone) pose near-term headwinds.

Current Impact: Estimates suggest recurring P&L impact from labour codes at 10-15 basis points beginning FY27, but this is manageable relative to AI revenue acceleration.

Mitigation: Companies are passing through cost increases via price hikes on AI-driven engagements, which enjoy higher pricing power than legacy services.

Monitoring Point: Track quarterly commentary from TCS/Infosys/HCL on pricing and margin realization.

3. Discretionary Spending Cycle Risk

Risk: Enterprise AI adoption remains in ROI-led phase rather than full-scale roll-out. If global corporations delay or reduce discretionary spending amid recession fears or geopolitical tensions, AI deal flow could soften.

Current Outlook: Mid-2026 is seen as turning point for acceleration, but this is not guaranteed.

Monitoring Point: Watch for signals of spending momentum in corporate earnings reports (particularly FAANG names in Jan-Feb earnings season).

4. Currency Volatility

Risk: Weak Indian rupee aids IT services export earnings but introduces return volatility. Rupee appreciation would hurt earnings translation.

Current Backdrop: INR weakness (-4% vs. USD in 2025) has been tailwind for IT exports; further weakness could provide additional boost.

Mitigation: Long-term investors can ignore short-term currency fluctuations, as they revert over multi-year periods.

The Verdict: A Layered Investment Approach

Rather than an all-or-nothing bet on any single route, a diversified framework harnesses both direct AI upside and emerging-market outsourcing leverage:

Recommended Allocation Model (for ₹10L investable capital)

Why This Works

Core Position (60-70% Nifty IT):

• Captures full spectrum of Indian IT's AI transformation

• Minimal overhead (0.32% expense ratio)

• Ideal for long-term compound growth via SIP

• Auto-rebalances toward largest, most liquid names

• Eliminates individual stock risk

Conviction Play (15-20%):

• One or two large-cap picks (TCS or Infosys)

• Attractive dividend yields (1.9-2.6%)

• Capital appreciation from AI scaling

• Easier for new investors to track/understand vs. full portfolio

Global AI Upside (10-15%):

• Direct capture of US AI infrastructure opportunity

• Hedge against India-specific macro/regulatory risks

• Simplest entry for global diversification (Mirae ETF FoF)

• No competing for same outsourcing narrative

Tactical Reserve (5%):

• Flexibility for mid-cap IT names (higher growth potential)

• Direct US stock picks via broker if conviction warrants

• Rebalancing source if core positions outperform

Projected Returns Over 7-10 Years

Across a 7-10 year horizon, as Indian IT companies scale AI to 15%+ of revenue and enterprise adoption reaches full deployment phase, this allocation should compound at 12-15% CAGR, materially outpacing base-case equity returns.

Conservative Case: 10% CAGR (earnings growth +dividends+modest re-rating)
Base Case: 12-13% CAGR (earnings acceleration + global investor return)
Bull Case: 15%+ CAGR (AI monetization reaches 20% of revenue + FPI inflows)

Actionable Next Steps (Implementation Plan)

Week 1: Research & Setup

1. Assess your risk tolerance & time horizon

   • If 7+ year horizon and comfortable with emerging-market volatility → proceed with 60-70% Nifty IT weighting

   • If nervous on macro → start with 50% Nifty IT + 50% Global AI ETF

2. Open brokerage/mutual fund account (if not already done)

   • Stocks/ETFs: Zerodha, Angel One, 5paisa (fastest onboarding)

   • Mutual Funds: Groww, ET Money, Kuvera (3-5 minute e-KYC)

3. Complete KYC documentation

   • PAN, Aadhaar, bank account (takes 10 minutes)

   • Form W-8BEN for US stock access (if going LRS route)

Week 2-3: Start Core SIP

4. Launch Axis Nifty IT Index ETF SIP

   • Start with ₹500-₹1,000/month

   • Set to auto-debit on 1st of each month

   • Expected time-to-accumulation for ₹1L: 8-10 months

5. Research & select one large-cap conviction pick

   • Compare TCS vs. Infosys vs. HCL on fundamentals

   • Read one recent earnings call transcript

   • Allocate ₹5,000-₹10,000 lump sum

Week 4-6: Add Global Exposure

6. Explore Mirae Asset Global AI ETF FoF

   • Check NAV and 3-month returns on Groww

   • Start with ₹1,000-₹2,000/month SIP

   • Review performance quarterly

7. If comfortable with LRS: Open Interactive Brokers account

   • Complete form at bank, remit $5,000 minimum

   • Allocate to SMH or AIQ ETF

   • Revisit after ₹5-10L accumulated capital

Ongoing (Quarterly Review)

8. Monitor earnings & adjust thesis

   • TCS, Infosys, HCL earnings: January, April, July, October

   • Track AI revenue % of total revenue

   • Monitor TCV (Total Contract Value) deal wins

   • Review updated valuation metrics

9. Rebalance annually

   • Check if core positions (IT vs. Global AI) remain in target allocation

   • Top-up underweight areas via SIP increase

   • Harvest losses if any position declines >15%

10. Tax-loss harvesting (December)

    • If Nifty IT down >10%, consider harvesting to reset cost basis

    • Immediately reinvest in LIC IT Index Fund or direct stocks

    • Locks in loss for offset while maintaining exposure

FAQ: Common Questions on AI Exposure via Indian Stocks

Q1: Will Indian IT stocks ever catch up to direct US AI plays (Nvidia, Microsoft)?

A: Unlikely on valuation multiples, but likely on returns. Indian IT trades at 26.9x (Nifty IT) vs. AI ETFs at 35-45x. As AI revenue scales from 5% to 15% of IT companies' total revenues, multiple re-rating combined with 15-20% earnings growth could deliver 15%+ annual returns-matching or beating US AI plays.

Q2: Is LRS worth the hassle for small investors?

A: Only if deploying ₹15L+. TCS (5% on >₹7L), bank fees, and FX spreads make small LRS remittances expensive. For ₹50K-₹5L, use Indian broker US access or Mirae Asset ETF FoF instead.

Q3: What happens if rupee strengthens against USD?

A: Helps your domestic portfolio but hurts IT export earnings translation. Over multi-year periods, currencies revert; long-term investors should ignore short-term volatility. Consider rupee weakness a 5-10 year tailwind for Indian IT.

Q4: Should I wait for a market crash before investing?

A: No. With SIP approach and 7-10 year horizon, market timing is impossible. Begin your SIP today; if crash occurs, your monthly SIP amount buys more shares at lower prices, averaging cost down.

Q5: How much AI revenue must Indian IT reach for this thesis to work?

A: 12-15% of total revenue. Currently at 5-6%. At current growth rates, this occurs by FY28-29. Requires no new discoveries-just continuation of current AI monetization trends.

Conclusion: The Opportunity Window

The opportunity to play global AI through Indian IT is real, structurally sound, and relatively underappreciated by global capital. The valuation gap created by FPI selling (₹17.5Tr outflow in CY2025) has opened a window that patient, long-term investors should seriously consider.

For Indian investors, this represents a rare confluence: leveraged exposure to a $2.4 trillion global opportunity, reasonable valuations reflecting near-term macro caution, and an emerging earnings recovery that should re-attract foreign capital. By layering Indian IT exposure with direct global AI plays, you create a balanced portfolio capturing both the outsourcing tailwind and direct infrastructure upside.

The time to build this position is now-before consensus re-rates Indian IT and the gap closes