India Could Attract Foreign Investors If Global AI Boom Fades: Uday Kotak

Renowned Indian banker Uday Kotak has suggested that the global artificial intelligence (AI) frenzy might wane, prompting foreign investors to gravitate towards markets with more attractive valuations. Kotak, the founder of Kotak Mahindra Bank, cautioned that mounting debt incurred by multinational companies to fund AI growth could be exacerbating inflated stock prices.

During a virtual address prior to Diwali, Kotak posited that India could capitalize on a reversal of overseas capital flows while simultaneously bolstering its own AI infrastructure. FPI outflows reached an all-time high of ₹3 lakh crore in 2026, a surge tied to US bond yields and the AI stock market rally triggering widespread selling.

Indian equities have rebounded about 10% from their early October lows, mirroring a downturn in global AI-linked stocks. Technology-centric Asian markets have slipped more than 7% over the same time frame, underscoring India's relative market stability. However, Indian equities remain among the region's underperformers in 2026. Foreign investors have withdrawn a staggering $29 billion due to worries about pricey valuations, escalating energy costs, and insufficient exposure to key AI enterprises.

Kotak, with an estimated fortune of $16.5 billion, noted that domestic investors have persisted in backing Indian markets despite geopolitical turbulence and unpredictable international dynamics. He is convinced that India's growth potential and enhanced relative valuations could enhance its allure to global investors. The Nifty 50 index now trades around 17.5 times projected earnings for the next year, down from 21 times in early 2026.

Although valuations have softened, Indian stocks still appear pricier compared to regional counterparts. The MSCI Asia Pacific Index trades at about 10 times forward earnings, implying that India continues to carry a notable premium. Kotak argued that India's valuation position has improved compared to the past six to 12 months, rendering equities comparatively more affordable.

He advised investors to concentrate on financially robust companies and maintain a medium-term investment perspective, warning against relying solely on fleeting market fluctuations. According to Kotak, adhering to disciplined risk management and investing in quality firms remains crucial as international markets grapple with uncertainty surrounding AI investments and capital flows.