Archive · 31 Jul 2026
India to Benefit as AI Bubble Corrects, Bay Capital Says
Bay Capital Investment Advisors wrote a paper saying that India could do really well when the big boom in artificial intelligence (AI) slows down.
They said that many foreign investors sold Indian stocks in 2024 and 2025 because they were looking for AI opportunities in places like Taiwan, South Korea, and China.
India didn’t have many AI companies on the big stock indexes, so investors left.
Even though foreign money left, Indian mutual funds kept getting more money from people in India.
Bay Capital thinks India’s economy will keep growing at about 6.7% a year, and that will help bring money back in.
They think the best time for India to start doing better is around the year 2027.
Bay Capital white paper claims India will outperform when AI cycle normalizes, targeting FY27.
Foreign investors withdrew $36B from Indian equities in 2024-2025, while Taiwan, South Korea, and China attracted $34B, $22B, and $18B respectively.
India's minimal presence in MSCI AI Index (0.2%) and Nasdaq AI Leaders Index explains capital outflows.
Domestic mutual fund inflows rose 27% YoY to ₹65 lakh crore, absorbing foreign selling.
Bay Capital cites India's 6.7% GDP growth, low inflation, and reforms as strengths for future capital return.
- Who
- Bay Capital Investment Advisors
- What
- Released a white paper arguing India will outperform when the AI cycle normalizes
- When
- Published July 31, 2026; inflection point projected for FY27
- Where
- India, in the context of global AI investment flows
- Why
- India’s negligible weight in AI indices caused capital outflows, but its growth prospects position it to benefit when sentiment normalizes
- Capital outflows from India (2024-2025)
- $36 billion
- Projected AI capex 2025
- $200-220 billion
- India's GDP growth outlook FY28
- 6.7% annually
- Domestic mutual fund AUM YoY growth
- 27%
- Target inflection point
- FY27