India has slipped to the sixth position in global stock market rankings, losing its status as the world’s fifth-largest equity market to Taiwan, as persistent foreign investor outflows, elevated valuations, and slowing earnings growth weighed on domestic equities.

Key Highlights

• India slipped to sixth globally as Taiwan’s AI-driven stock rally pushed past Indian market capitalisation.
• Foreign outflows and slowing earnings weighed heavily on Indian equities despite strong economic fundamentals.

According to data compiled by Bloomberg, India’s total stock market capitalization has declined to USD 4.92 trillion, falling behind Taiwan, whose market value climbed to USD 4.95 trillion as of Monday. Taiwan now occupies the fifth position globally, behind only the United States, mainland China, Japan, and Hong Kong.

The shift highlights the growing divergence between India’s broader economic strength and near-term stock market performance, as global capital increasingly chases technology-led opportunities linked to the artificial intelligence boom.

Foreign Investors Pull USD 24 Billion from Indian Markets

India’s equity markets have faced mounting pressure this year as foreign institutional investors pulled nearly USD 24 billion from domestic stocks, redirecting capital toward semiconductor-heavy markets such as Taiwan and South Korea, which are benefiting directly from the global AI investment cycle.

Indian benchmark indices have fallen 8 percent year-to-date, putting the market on track for its first annual decline in over a decade.

The country’s weighting in the MSCI Emerging Markets Index has also dropped sharply to around 12 percent, down from 19 percent last year, reflecting reduced global allocation to Indian equities amid concerns over expensive valuations and weaker near-term corporate earnings visibility.

Rising crude oil prices and a weaker rupee have further increased inflationary concerns, dampening investor sentiment and clouding growth expectations for key sectors.

Taiwan Gains from AI Boom, India Lacks Direct Exposure

Taiwan’s rise has been largely powered by a sharp rally in semiconductor giant Taiwan Semiconductor Manufacturing Company (TSMC), whose shares have surged 49 percent this year.

TSMC alone accounts for nearly 42 percent of Taiwan’s benchmark stock index, reflecting the market’s deep concentration in AI-linked semiconductor manufacturing.

Yi Ping Liao Fund Manager at Franklin Templeton, said Taiwan’s market capitalization growth reflects its strategic positioning at the heart of the global AI hardware supply chain.

"Markets with limited exposure to tech hardware are increasingly being overshadowed by semiconductor-heavy markets such as Taiwan and South Korea," Liao noted.

India, despite its strong digital economy and rapidly expanding startup ecosystem, currently lacks large listed companies directly linked to AI hardware manufacturing, limiting its ability to capture global AI-driven equity flows.

Also Read: India Now World's Fourth-Largest Stock Market with Rs 470 L Cr Cap

India’s Economic Fundamentals Remain Strong

Despite losing its fifth-largest stock market position, India continues to significantly outperform Taiwan in economic scale.

According to International Monetary Fund estimates, India’s economy is valued at USD 4.15 trillion, making it one of the fastest-growing major economies globally, compared to Taiwan’s USD 977 billion GDP.

Analysts believe India could regain its ranking if earnings growth improves, foreign inflows return, and policy reforms accelerate manufacturing-linked sectors such as semiconductors and advanced technology.

For now, Taiwan’s AI-driven rally has reshaped global equity rankings, pushing India temporarily out of the top five.