Indian Markets Shielded from AI Bubble: A Balanced Approach

Indian equity markets may remain insulated from the potential risks associated with an artificial intelligence (AI) bubble, thanks to their limited exposure to AI-focused companies and a more balanced market structure, as highlighted in a report by Motilal Oswal Private Wealth.

The report underscores that while global markets, particularly the US, undergo sharp boom-bust cycles due to tech-heavy indices, Indian markets have historically demonstrated greater resilience during such periods. A key comparison in the report draws attention to the market capitalisation of global 'MAG7' stocks, which stands at a staggering USD 19.4 trillion, mirroring China's GDP.

This concentration poses valuation risks for tech-centric markets. Historically, Indian equities have been more stable during volatile times; the Nasdaq 100 surged 643% from 1996-2000 and dropped 75% post-boom, whereas Nifty 50 saw an 80% rise and a milder 39% fall. Recent trends further suggest lower valuation froth in Indian markets as AI gains momentum.