India’s equity market slipped to seventh place globally by market capitalisation on Tuesday, as heavy foreign investor selling, weaker earnings growth, and limited exposure to artificial intelligence-linked stocks enabled South Korea to move ahead.
Data from stock exchanges showed that the combined market value of companies listed on South Korea’s KOSPI, KOSDAQ, and KONEX exchanges rose to $5.01 trillion.
That surpassed the $4.85 trillion market capitalisation of companies listed on India’s National Stock Exchange.
The shift marks another setback for India’s equity market, which had long been considered a preferred destination among emerging market investors.
After falling behind Taiwan last month, India has now slipped two places in global rankings within a fortnight.
India’s lead over regional peers narrows
According to Bernstein analysts Venugopal Garre and Nikhil Arela, India’s previous advantage over regional peers has disappeared rapidly.
“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,” Garre and Arela said in a note.
The decline reflects a difficult year for Indian equities.
The Nifty 50 and BSE Sensex have fallen 10.1% and 12.5%, respectively, in 2026.
Meanwhile, the Nifty IT index, the second-largest sector represented in the benchmark indices, has dropped 19%.
The weakness has been attributed to a subdued earnings outlook and continued foreign investor selling.
Record foreign outflows weigh on indian markets
Foreign investors have withdrawn $26.4 billion from Indian equities so far in 2026.
The figure has already surpassed the previous annual record outflow of $18.91 billion registered in 2025.
India’s weight in the MSCI Global Standard Index has also declined significantly.
Its share has fallen to 12.3% from a peak of 21% recorded in September 2024.
AI boom fuels South Korea and Taiwan
The contrast has been especially visible in technology-focused markets.
South Korean semiconductor companies Samsung Electronics and SK Hynix have posted strong gains this year, helping drive a sharp rise in South Korean equities.
The KOSPI index has climbed 107%, while Taiwan’s benchmark weighted index has advanced 59%.
The gains have been largely supported by growing investor demand for stocks linked to artificial intelligence and semiconductor production.
India, in comparison, has struggled to benefit directly from the AI-driven investment theme.
Market returns indicate that the narrative is that “AI is the defining theme and semiconductors are at its centre and within emerging markets, that story belongs to Taiwan and Korea, not India,” Laijawala said, as cited in Reuters report.
India May benefit indirectly from AI expansion
Despite the current market perception, Laijawala argued that India’s role in the AI ecosystem should not be overlooked.
He said India offers a picks-and-shovels opportunity in the AI era through investments linked to electricity generation, cooling systems, physical infrastructure, and data centres that support broader AI development.
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