3d business graph shows financial growth | Photo Credit: bluebay2014

Would investors rather back a diversified market, or saddle up on a one-trick pony with a shiny AI chip on its mane? Strangely enough, many global funds seem to be choosing the pony.  

Overseas investors have flocked to markets such as Taiwan and South Korea in 2025-26, riding the boom in artificial intelligence, semiconductors and related technologies. But a closer look at the composition of some of the world’s best-performing equity markets suggests that investors buying these country indices are often making concentrated bets on a handful of companies rather than gaining exposure to broad-based economic growth. 

Data from MSCI country indices show that India stands apart as one of the least concentrated major equity markets globally. While many high-performing markets are dominated by a single stock or sector (see charts), India’s benchmark remains relatively diversified across companies and industries. 

The analysis is based on MSCI country price return indices, with returns measured in US dollar terms for the one-year period ended June 11, 2026. MSCI’s country-specific indices are designed to capture about 85 per cent of the free-float-adjusted market capitalisation of each market. 

Single-stock markets 

Taiwan offers perhaps the clearest example of market concentration. The MSCI Taiwan Index delivered a strong 93.1 per cent return over the past year. Yet Taiwan Semiconductor Manufacturing Company (TSMC) alone accounts for 54.8 per cent of the benchmark. The stock itself gained 99.8 per cent during the period, underscoring how closely the market’s performance is tied to a single corporate giant. 

South Korea presents an even starker picture. The MSCI Korea Index surged 200.4 per cent over the past year, led by Samsung Electronics, which carries a weight of 33.7 per cent and rallied 356.6 per cent. The top three stocks together account for 66.1 per cent of the benchmark. 

The same pattern is visible elsewhere. ASML Holding represents nearly 50 per cent of the MSCI Netherlands Index, while Novo Nordisk accounts for 40 per cent of the MSCI Denmark Index. In Singapore, DBS Group carries a weight of 29 per cent, while Bank Central Asia commands more than 24 per cent of Indonesia’s benchmark. 

Such concentration has worked exceptionally well when the dominant company is aligned with a powerful global investment theme. Taiwan’s outperformance has coincided with soaring demand for AI chips, while Korea has benefited from investor enthusiasm for memory semiconductors and electronics. Investors may believe they are diversifying internationally, but in many cases they are effectively backing a small number of corporate champions. 

Bloomberg-derived earnings growth estimates for MSCI country indices suggest India may grow slower than peers such as the US, Taiwan, Korea and the Netherlands in FY27, but where such growth is dependent on a handful of stocks or one-two sectors, it can change quickly if fortunes reverse. Foreign portfolio investors, who have already sold Indian equities worth over $30 billion this year, may well take note of this vulnerability. 

India’s broader market 

India offers a markedly different proposition. The largest stock in the MSCI India Index, HDFC Bank, accounts for only 6.4 per cent of the benchmark. The top three stocks together represent just 17.5 per cent, among the lowest concentration levels across major markets. By comparison, the corresponding figure exceeds 60 per cent in Taiwan, South Korea, Denmark and the Netherlands. 

This broader base also feeds into India’s relative appeal for overseas investors. India is the only emerging market that offers political, economic and earnings stability, Ganeshram Jayaraman, CIO & Head of Avendus Public Equities, had said in an earlier interview to bl.portfolio. 

Sector representation is also considerably broader. Financials account for 28.4 per cent of the index, followed by consumer discretionary at 12.1 per cent and industrials at 11.5 per cent. No single sector comes close to the dominance seen in Taiwan, where information technology accounts for 88.8 per cent of the benchmark, or South Korea, where technology represents more than 70 per cent. 

This means that investors buying India are gaining exposure to multiple drivers of economic growth rather than a single corporate or sectoral story.  

The trade-off 

Diversification, however, comes with a trade-off. Concentrated markets can generate spectacular returns when their dominant stock or sector is in favour.  

But concentration also magnifies risk. Denmark offers a recent reminder. The MSCI Denmark Index fell 24 per cent over the past year as Novo Nordisk, its largest constituent, declined 45.3 per cent. With nearly 40 per cent of the benchmark tied to a single stock, weakness in one company translated into weakness for the entire market. 

The higher the concentration, the more a country index behaves like a single-stock portfolio rather than a diversified representation of an economy. 

Takeaway 

The distinction between country risk and company risk is increasingly blurred in several global markets. Investors buying Taiwan, South Korea or the Netherlands are often expressing a view on TSMC, Samsung Electronics or ASML as much as they are on the underlying economies. Country ETFs and index funds in such markets can therefore be far less diversified than they appear. 

India is not free from concentration risk. Financials remain the largest sector, accounting for more than a quarter of the benchmark. Yet compared with many of its global peers, India’s market is far less dependent on the fortunes of any single company or theme. 

Published on June 13, 2026