Could a Global AI Correction Bring Foreign Capital to India? Uday Kotak's View Explained

But an investment boom of this scale also raises questions about valuations, financing and the returns expected from these investments.

This is where an observation from Uday Kotak becomes particularly relevant.

In a virtual address ahead of Diwali, the founder of Kotak Mahindra Bank highlighted how the leverage being used by some global companies to finance their AI ambitions could contribute to overvaluation in certain cases.

He also pointed to a possible opportunity for India.

If the global AI investment boom unwinds, foreign capital could potentially move towards markets offering more attractive valuations.

The important distinction is that Kotak described a possibility, not a confirmed forecast of future investment flows.

Why India could enter the picture

The argument is not simply that global AI stocks could fall.

It is about how international investors might reassess their capital allocation when valuations, risks and growth expectations change.

Three factors make India relevant to this discussion.

1. Changing valuations in global markets

When capital flows heavily into a particular investment theme, market valuations can sometimes move ahead of underlying business performance.

If investors begin questioning the leverage and expected returns behind parts of the global AI investment cycle, some may reconsider their exposure.

Markets with credible growth opportunities and relatively attractive valuations could receive renewed attention.

India could be one of them.

2. India's developing AI capabilities

India is also working towards strengthening its domestic artificial intelligence ecosystem.

The opportunity is not necessarily about moving away from AI.

It is about the possibility of attracting investment into an economy that is building its own technological capabilities while offering exposure to a broader range of industries.

3. An improving relative valuation position

Indian equities have become relatively less expensive compared with earlier in 2026.

According to Bloomberg's November 5 report, the Nifty 50 was trading at approximately 17.5 times estimated 12-month forward earnings, compared with 21 times at the beginning of the year.

However, the MSCI Asia Pacific Index was trading at approximately 10 times forward earnings.

This is an important distinction.

India's valuation position has improved, but it still commands a substantial premium over regional peers.

That means future earnings growth will remain critical to justifying the premium.

Foreign investors are returning. The numbers are worth watching.

An interesting development followed Kotak's comments.

On November 5, foreign investors purchased approximately ₹14,796 crore worth of Indian equities, their largest single-day net purchase in nearly six years, according to Reuters, citing provisional exchange data.

The market rally continued into November 6.

By the end of that week:

• The Nifty 50 had gained approximately 8.6%.
• The Sensex had gained approximately 8.8%.
• Both benchmarks recorded their strongest weekly performances since February 2021.

These developments indicate a significant improvement in investor sentiment.

However, the reasons behind the recovery are broader than the global AI sell-off.

Falling crude oil prices, changing geopolitical expectations, global market movements and foreign investor repositioning also contributed.

It would therefore be inaccurate to attribute the entire inflow or market rally to an AI correction.

The more meaningful development is that global investors appear to be reassessing their exposure to Indian equities after a prolonged period of substantial selling.

What does this mean for India's BFSI ecosystem?

Foreign portfolio movements are important to financial markets, but their implications for banks, NBFCs and fintech companies need to be understood carefully.

Banking and financial institutions

Sustained foreign investor participation could improve market sentiment towards listed Indian financial institutions.

However, individual bank and NBFC valuations will continue to depend on their earnings, asset quality, capital adequacy, funding costs and business performance.

NBFCs and lending companies

A stronger equity-market environment can support investor confidence and market access for listed financial institutions.

But equity portfolio inflows should not be confused with direct lending capital or an immediate increase in liquidity available for loans.

The funding position of individual lenders remains dependent on their own balance sheets and funding channels.

Fintech and financial technology

The broader AI investment cycle also presents a separate opportunity for India's fintech ecosystem.

Financial institutions are increasingly exploring technology for underwriting, fraud prevention, customer service, risk management and operational efficiency.

The long-term opportunity will depend on how effectively these businesses turn technological investment into measurable improvements.

Five indicators worth monitoring

Whether India benefits from a sustained shift in global capital allocation will depend on several factors.

1. Foreign portfolio investment: Do foreign investors continue buying Indian equities, or does the recent movement prove temporary?

2. Global AI valuations: Does the reassessment of AI-linked investments continue, and how does it affect broader capital allocation?

3. Crude oil prices: Do lower energy costs support India's inflation outlook and external financial position?

4. Corporate earnings: Can Indian companies deliver growth that justifies their valuation premium?

5. Global interest rates and currency stability: Do international financial conditions remain supportive of emerging-market investments?

Together, these indicators will help distinguish a short-term market rebound from a more durable improvement in investor confidence.