Indian Equity Markets Seen as Shielded from Potential AI Bubble: Motilal Oswal Report
Indian equity markets appear relatively protected from the risks of a potential artificial intelligence (AI) bubble, thanks to limited exposure to pure-play AI companies and a more balanced market structure, according to a report by Motilal Oswal Private Wealth. While global markets, particularly in the US, have witnessed sharp boom-bust cycles in technology-heavy indices, Indian equities have historically shown resilience during similar periods.
Global Tech Valuations Highlight Bubble Risk
The report compared the market capitalisation of global “MAG7” stocks with the GDP of major economies. The MAG7, with a combined market value of USD 19.4 trillion, is equivalent to China’s GDP and vastly exceeds that of Germany (USD 5.3 trillion), Japan (USD 4.3 trillion), India (USD 4 trillion), and the UK (USD 3.7 trillion). This concentration underscores the scale of valuation risk in tech-heavy global markets. Historical comparisons during the dot-com bubble (1996–2003) reveal that while the Nasdaq 100 surged 643% before collapsing 75%, the Nifty 50 gained 80% and fell only 39%, demonstrating India’s relative insulation from extreme boom-bust cycles.
Valuation Discipline Shields Indian Markets
From 2016 to 2026, the Nasdaq 100 delivered 494% returns compared to the Nifty 50’s 246%. However, PE expansion tells a different story: the Nasdaq’s P/E re-rating stood at 88%, while India’s was just 28%. This indicates lower valuation froth in Indian equities, highlighting their more stable foundation.
Balanced Exposure Reduces Bubble Vulnerability
India’s limited dependence on a narrow set of highly valued AI and tech stocks provides a buffer against sharp corrections in case of an AI-driven bubble burst. With a diversified market structure, Indian equities are viewed as less vulnerable to excessive optimism around AI, offering a layer of protection for investors while maintaining steady growth potential.
(This article has been syndicated from ANI)
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