India’s equity markets slipped to seventh place in terms of market capitalisation on Tuesday (June 2, 2026) as heavy ​foreign selling, weak earnings growth and limited exposure to AI-linked stocks allowed ‌South Korea’s chip-heavy market to overtake it.

South Korean stocks have rallied ​this year, driven by AI chipmakers, which have lifted ⁠the combined value of companies listed on the KOSPI, KOSDAQ and KONEX to $5.01 trillion, surpassing the $4.85 trillion value of firms on India’s National Stock Exchange, exchange ‌data showed.

India, once a darling among emerging markets, has now fallen two rungs in a fortnight after slipping behind Taiwan ‌last month.

“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,” Bernstein analysts Venugopal Garre and Nikhil Arela said in a note.

India’s Nifty 50 and BSE Sensex have lost 10.1% and ​12.5% each this year, ‌while the IT index - the second-heaviest sector on the benchmarks - has tumbled 19%, pressured by a subdued earnings outlook and persistent foreign selling.

Foreign investors have pulled out $26.4 billion from Indian stocks so far in 2026, ‌surpassing $18.91 billion in 2025 - the previous annual record.

Additionally, India’s share in ​the MSCI Global Standard index has shrunk to 12.3% from a peak of 21% in September 2024.

“It’s really ⁠a remarkable decline and a restructure of the whole investment environment for us because of, obviously, the rise of South Korea and Taiwan as ‌well,” said Naomi Waistell, a fund manager in the emerging equities team at French firm Carmignac, which manages 41 billion euros ($47.76 billion) in assets.

The contrast is particularly stark in technology-heavy markets. South Korean chipmakers Samsung Electronics and SK Hynix have surged this year, lifting the KOSPI 107% higher while Taiwan SE Weighted index has advanced 59%, boosted by demand for AI-linked ‌stocks.

India, by comparison, has struggled to benefit from the AI-driven investment boom.

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,” said Abhay Laijawala, managing ⁠director and India chief investment officer at Lighthouse Canton.

However, that view may be overstated as India offers a “picks-and-shovels” opportunity in ‌the AI era through investments tied to electricity, cooling systems, physical infrastructure and data centres that underpin the broader AI ecosystem, Laijawala added.