India’s equity markets fell to seventh place in terms of market capitalization on Tuesday, as significant foreign selling, weak earnings growth, and limited exposure to AI-linked stocks allowed South Korea’s chip-heavy market to surpass it.
Recent data indicate that South Korean stocks have surged this year, largely driven by artificial intelligence (AI) chipmakers. This surge has increased the combined market value of companies listed on the KOSPI, KOSDAQ, and KONEX to $5.01 trillion, exceeding the $4.85 trillion value of firms on India’s National Stock Exchange.
Once regarded as a leading emerging market, India has now dropped two positions within the last fortnight, having already fallen behind Taiwan the previous month. Bernstein analysts Venugopal Garre and Nikhil Arela noted that “about 18 months ago, India’s equity market cap was roughly 3.5 times South Korea’s and more than twice Taiwan’s. Fast forward just five months into 2026, and that lead has evaporated.”
In 2026, India’s Nifty 50 and BSE Sensex have seen declines of 10.1% and 12.5% respectively, while the IT index—the second heaviest sector on these benchmarks—has plummeted by 19%, affected by a depressed earnings outlook and ongoing foreign selling. So far this year, foreign investors have withdrawn $26.4 billion from Indian stocks, surpassing the previous annual record of $18.91 billion set in 2025.
India’s representation in the MSCI Global Standard index has also declined, dropping from a peak of 21% in September 2024 to its current share of 12.3%. Naomi Waistell, a fund manager in the emerging equities team at the French firm Carmignac, which oversees 41 billion euros ($47.76 billion) in assets, remarked, “It’s really a remarkable decline and a restructure of the whole investment environment for us, primarily due to the rise of South Korea and Taiwan.”
The disparity is particularly noticeable in technology-focused markets. South Korean chipmakers Samsung Electronics and SK Hynix have excelled this year, propelling the KOSPI index up by 107% and the Taiwan SE Weighted index by 59%, fueled by demand for AI-related stocks. Conversely, India has struggled to tap into the AI-driven investment boom.
Market returns highlight that the prevailing narrative is that “AI is the defining theme and semiconductors are at its center; within emerging markets, that story belongs to Taiwan and Korea, not India,” stated Abhay Laijawala, managing director and India chief investment officer at Lighthouse Canton.
However, Laijawala suggested that this perspective may be somewhat exaggerated, as India presents “picks-and-shovels” opportunities in the AI sector through investments in electricity, cooling systems, physical infrastructure, and data centers that support the wider AI ecosystem.
The article concludes, noting its publication date: June 2, 2026.
