If AI-Bubble Bursts, India Stands To Gain, Says Macquarie’s Sandeep Bhatia

Global markets are witnessing an artificial intelligence (AI) bubble — but unlike most other countries, Sandeep Bhatia, Managing Director and Head of Equity India at Macquarie Capital, sees a silver lining for India.

According to Bhatia, the AI-driven investment wave is concentrated in just three major markets — the United States, China and India. "If the AI bubble bursts, India could actually benefit,” he said.

Bhatia likens the AI surge to previous episodes of exuberance such as the dot-com boom. “There is a bubble in the primary markets but that's how they function, and when bubbles happen, we see expansion of markets and businesses that are listed and that's how see broadening of debt and breadth of market,” he said.

“Eventually all bubbles burst, but as long as businesses have solid cash flows and fundamentals, they survive and mature. We saw this with the Y2K bubble, tech companies today have matured and become much larger than when it started.”

Bhatia also added that the Indian equities remain in a holding pattern. The market feels like it’s in suspended "it's like liquid oxygen, won't die but won't live out,” he said. He expects single-digit returns from the indices, with earnings growing at around 10–15% annually.

He attributed this stability to time-based valuation correction rather than sharp price declines. “Valuations haven’t corrected dramatically, but they’ve cooled over time as markets have stayed flat,” he said.

While discussing the broader economic backdrop he noted that it remains healthy, supported by a revival in consumption and gradual improvement in private capex. “We’re seeing early signs of consumption returning after 18 months of weakness. Private capex is improving too, though CFOs are far more risk-averse than they were in 2007–2012,” he said.

On sectors, Bhatia remains constructive on autos — particularly Mahindra & Mahindra — and selective on consumer and pharmaceutical names. He noted that Asian Paints could recover some lost ground following management changes, while Sun Pharma remains a preferred pick within healthcare.