According to a report by Motilal Oswal Private Wealth, concerns are being raised about a possible artificial intelligence (AI)-related bubble in equity markets globally. However, the report said that the Indian equity market is in a relatively safe position compared to this risk. According to the report, investment in purely AI-based companies in India is currently limited and the market structure is more balanced and diversified.
The report’s data highlighted that while global markets, especially in the US, have seen sharp boom and bust cycles driven by technology-dominated indices, Indian markets have historically shown greater resilience during such phases.
Global MAG7 Stock Markets
One of the key comparisons made in the report is between the market capitalization of global MAG7 stocks and the gross domestic product (GDP) of major economies. The data shows that the market capitalization of the MAG7 countries is US$19.4 trillion, which is equivalent to China’s gross domestic product (GDP) of US$19.4 trillion and significantly higher than the GDP of countries such as Germany (US$5.3 trillion), Japan (US$4.3 trillion), India (US$4 trillion) and the UK (US$3.7 trillion). This highlights the scale of valuation risk in global technology-intensive markets.
What is MAG7?
This group of high-performing and influential companies in the American stock market, called ‘The Magnificent Seven’, includes Alphabet (Google), Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla.
Comparison of performance of Nasdaq 100 and Nifty 50 during the period of dot com bubble.
The report compares the performance of the Nasdaq 100 and Nifty 50 during the period of the dot-com bubble. This includes the Nasdaq 100 rising 643 percent between 1996 and 2000, while the Nifty 50 rose a relatively modest 80 percent. When the market bubble burst between 2000 and 2003, the Nasdaq 100 fell a whopping 75 percent while the Nifty 50 fell 39 percent. During the economic recovery period from 2003 to 2007, the Nasdaq 100 rose by 88 percent, while the Nifty 50 recorded an even stronger rise of 557 percent. Therefore, according to the data in the report, this historical trend shows that India remained relatively safe from the extreme boom-bust cycles seen during the dotcom era.
What is dot-com bubble?
The dot-com bubble was a period of highly speculative investment in Internet-based companies that lasted from approximately 1995 to 2000, with a peak on March 10, 2000, and followed by a sharp decline until 2002.
Nasdaq and Nifty 50 returns
According to the report, looking at the recent performance, from January 2016 to January 2026, Nasdaq 100 gave a return of 494 percent, while Nifty 50 gave a return of more than 246 percent, which is quite high. However, the increase in valuations has been a different story.
The PE re-rating for the Nasdaq 100 during the same period stood at 88 per cent, while for the Nifty 50 it was only 28 per cent, further indicating undervaluation in Indian equities.
Indian market is safe from possible AI bubble
According to the report, India’s relatively limited participation in AI-based companies provides a layer of protection to the market in case any potential AI-driven bubble bursts. The structure of the Indian equity market remains more balanced due to less dependence on a select few high-value technology stocks. For this reason, Indian markets are considered relatively less sensitive to sharp declines caused by excessive optimism about AI.
