RBI Governor Warns AI Valuation Correction Could Rattle Global Markets, but Says India Could Gain Flows
Reserve Bank of India Governor Sanjay Malhotra on Saturday warned that a correction in elevated artificial intelligence-linked valuations in advanced economies could trigger sharp repricing of financial assets, while adding that India could benefit as capital redirects toward emerging markets.
AI as a financial-stability risk
Speaking at the Kautilya Economic Conclave in New Delhi, Malhotra said the AI investment cycle has been a major support for global markets, but any slowdown in AI investment or earnings could "trigger a sharp repricing of financial assets, especially in the AI value chain." He listed stretched AI valuations among five major risks facing the global financial system, alongside elevated global debt, leverage in non-bank finance, private credit and cyber threats.
A possible upside for India
For India, such a correction could prove favourable. "As for corrections in AI-related valuations, if they were to happen in advanced countries... it may have a positive impact in terms of capital inflows," Malhotra said. He noted that Indian equity markets have already corrected from elevated valuations in recent months, but the adjustment has remained orderly.
Position of strength
Malhotra stressed that none of the five risks individually represented an imminent threat. "It is not that I see any imminent signs of stress," he said. "But we need to remind ourselves that we need to remain alert to these risks." He added that India was navigating the current global uncertainty from a "position of strength", supported by strong macroeconomic fundamentals and resilient balance sheets of banks and non-bank financial institutions.
Sources: AI valuation correction could boost capital flows to India, but poses global financial risks: RBI Governor — Moneycontrol via TradingView, 5th Kautilya Economic Conclave to be held in Delhi from October 3-5 — Lokmat Times (ANI)
Reserve Bank of India Governor Sanjay Malhotra on Saturday warned that a correction in elevated artificial intelligence-linked valuations in advanced economies could trigger sharp repricing of financial assets, while adding that India could benefit as capital redirects toward emerging markets.
AI as a financial-stability risk
Speaking at the Kautilya Economic Conclave in New Delhi, Malhotra said the AI investment cycle has been a major support for global markets, but any slowdown in AI investment or earnings could "trigger a sharp repricing of financial assets, especially in the AI value chain." He listed stretched AI valuations among five major risks facing the global financial system, alongside elevated global debt, leverage in non-bank finance, private credit and cyber threats.
A possible upside for India
For India, such a correction could prove favourable. "As for corrections in AI-related valuations, if they were to happen in advanced countries... it may have a positive impact in terms of capital inflows," Malhotra said. He noted that Indian equity markets have already corrected from elevated valuations in recent months, but the adjustment has remained orderly.
Position of strength
Malhotra stressed that none of the five risks individually represented an imminent threat. "It is not that I see any imminent signs of stress," he said. "But we need to remind ourselves that we need to remain alert to these risks." He added that India was navigating the current global uncertainty from a "position of strength", supported by strong macroeconomic fundamentals and resilient balance sheets of banks and non-bank financial institutions.
Sources: AI valuation correction could boost capital flows to India, but poses global financial risks: RBI Governor — Moneycontrol via TradingView, 5th Kautilya Economic Conclave to be held in Delhi from October 3-5 — Lokmat Times (ANI)
