Taiwan, Korea overtake India in market value

June 07, 2026 (MLN): A powerful wave of artificial intelligence investment is redrawing the competitive landscape of Asian equity markets, leaving India increasingly isolated as regional peers surge ahead on the back of semiconductor and chip-related gains.

Stocks tied to AI infrastructure including major chipmakers and memory manufacturers across Taiwan and South Korea have seen their valuations climb into trillion-dollar territory in 2026, drawing global capital away from markets that lack comparable exposure to the theme.

India, which has no significant large-scale presence in AI hardware or manufacturing, finds itself at a growing disadvantage.

Compounding the challenge is a domestic consumption story that is showing visible signs of strain.

Indian households are grappling with persistent inflationary pressure, a depreciating currency, and a slowdown in meaningful employment generation, according to CNBC.

These conditions are weighing on corporate earnings prospects for the fiscal year through March 2027, and are accelerating the exit of foreign institutional capital.

Data from India's national depository shows that overseas investors have offloaded Indian equities worth approximately $27.6bn since the start of 2026 a figure that already surpasses the entire net outflow recorded in 2025, which stood at $18.9bn.

The consequences are visible in market capitalisation rankings. Taiwan's equity market briefly crossed the $5 trillion threshold in late May, overtaking India to claim the fifth spot globally.

Days later, South Korea followed suit, pushing India further down the rankings.

The contrast with conditions roughly 18 months ago is stark at that point, India's market capitalisation stood at more than three times South Korea's and over twice that of Taiwan, according to analysis by Bernstein.

For much of the past ten years through 2024, India was counted among the world's most rewarding equity destinations. That reputation is now under pressure.

Industry observers note that sentiment toward Indian markets has shifted from one of near-universal enthusiasm to widespread caution in under two years.

The AI investment theme is proving difficult to compete against. With earnings upgrades continuing to flow into AI-linked stocks, global allocators see little reason to rotate into markets that lack direct exposure.

Year-to-date returns show this divergence sharply: South Korea's benchmark index has gained over 130% in 2026, while Taiwan's key index is up more than 60%.

Indian benchmarks, by contrast, are the only major Asian indices in negative territory, having shed over 10% in the same period.

Despite this, analysts caution against treating India's underperformance purely as a story of missing the AI wave. Other markets without any AI exposure such as Brazil have managed to perform credibly.

The deeper issue, several experts argue, is a combination of elevated valuations and weak earnings delivery. Indian equities are currently priced at approximately 21 times forward earnings comparable to Taiwan while South Korean stocks trade at roughly nine times forward earnings, offering far greater value.

Global brokerage Nomura has trimmed its consensus earnings forecasts for a broad basket of leading Indian companies by around 4% for the current fiscal year, attributing the revision largely to cost pressures stemming from the ongoing Middle East conflict.

India's declining appeal is also visible in index composition. Its weighting in the MSCI Emerging Markets Index has contracted to approximately 11%, down sharply from a peak of nearly 20% in 2024.

While a resolution to the Middle East conflict could ease some near-term headwinds, analysts point to more enduring structural concerns.

Advances in automation and robotics are steadily eroding the cost advantage that made India's large workforce an attractive proposition for global manufacturers.

Simultaneously, rapid AI adoption is casting uncertainty over the long-term growth trajectory of segments of India's information technology sector a cornerstone of its services export economy.

Even if geopolitical conditions stabilise, these structural pressures, combined with valuations that remain elevated relative to regional peers, are likely to temper foreign investor appetite for the foreseeable future.

India's central bank may surprise markets at its monetary policy meeting by raising its benchmark interest rate rather than holding it steady, as it seeks to defend the rupee against a backdrop of elevated inflation a playbook similar to that recently adopted by Indonesia.

US beverage giant Coca-Cola has confirmed it is exploring the public listing of its Indian bottling arm, Hindustan Coca-Cola Holdings, on both the Bombay Stock Exchange and the National Stock Exchange of India, with 2027 as the target timeline.

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