New Delhi, June 30 -- A sharp correction in global equity markets could spill over into Indian markets, particularly if driven by a reassessment of earnings growth and elevated valuations in AI-related stocks, the Reserve Bank of India has warned.

"The global economy and financial system are being reshaped by two profound forces-growing geopolitical fragmentation and technological disruption brought about by rapid advances in AI," RBI governor Sanjay Malhotra said in his foreword to the central bank's half-yearly Financial Stability Report released on Tuesday.

Inflationary pressures may require central banks of major advanced economies to remain hawkish, potentially tightening global financial conditions, Malhotra said. Further, vulnera...