India’s stock markets fell to seventh place globally by market capitalization on Tuesday as heavy foreign outflows, modest earnings growth and limited exposure to artificial intelligence shares enabled South Korea’s semiconductor-focused exchange to move ahead.
South Korean equities advanced this year on the back of AI chip producers, pushing the total value of companies on the KOSPI, KOSDAQ and KONEX to $5.01 trillion and ahead of the $4.85 trillion recorded on India’s National Stock Exchange.
India, previously viewed favorably by emerging-market investors, has now dropped two positions in two weeks after losing ground to Taiwan last month.
Roughly 18 months earlier, India’s equity market capitalization stood at about 3.5 times that of South Korea and more than twice Taiwan’s. Within five months of 2026 that advantage had disappeared, according to analysts at Bernstein.
The Nifty 50 and BSE Sensex have declined 10.1 percent and 12.5 percent respectively this year, while the IT sector, the second-largest weighting on the benchmarks, fell 19 percent amid weak earnings prospects and continued foreign selling.
Foreign investors have withdrawn $26.4 billion from Indian equities so far in 2026, exceeding the previous annual record of $18.91 billion set in 2025.
India’s weighting in the MSCI Global Standard index has also declined to 12.3 percent from a high of 21 percent in September 2024.
The shift reflects the stronger performance of South Korea and Taiwan, both of which have benefited from demand for AI-related stocks. South Korea’s KOSPI has risen 107 percent this year while Taiwan’s SE Weighted index has gained 59 percent.
India has found it harder to capitalize on the AI investment wave. Market returns suggest the prevailing view is that semiconductors lie at the center of the AI theme and that, within emerging markets, this narrative favors Taiwan and South Korea rather than India.
Nevertheless, India may still offer indirect exposure through spending on power, cooling systems, infrastructure and data centers that support the wider AI ecosystem.
