Why Taiwan and South Korea’s stock markets have surged past India
Hello, I am Priyanka Salve, writing to you from Singapore.
Welcome to the latest edition “in india“ — your one-stop source for stories and developments from the world’s fastest-growing major economy.
AI-driven gains in TSMC, Samsung and SK Hynix, along with a weak rupee and headwinds from the Middle East conflict are reshaping Asia’s market rankings. This week I explore how the theme of artificial intelligence is overshadowing India’s consumption story.
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In 2026, animal spirits drive investments in AI companies and value stocks: TSMC, SAMSUNG And SK Hynix over a trillion dollars.
That’s bad news for India, the world’s fastest-growing major economy and without a large-scale AI play, especially at a time when its much-sought-after domestic consumption story is cracking, according to experts interviewed by CNBC. Households face high inflation, a weak currency and a slowdown in quality job creation.
This decline in consumer spending and the increase in input costs due to conflicts in the Middle East is also expected to slow down corporate earnings in the fiscal year ending March 2027, experts said, adding that this has made foreign investors even more eager to exit.
Foreign investors sold Indian shares Worth $27.6 billion Since January, that’s compared to a total of $18.9 billion in 2025, according to data from Indian depositary NSDL.
Meanwhile, the market value of India’s peers is rising rapidly. Taiwan’s market capitalization reached nearly $5 trillion on May 26, surpassing India to become the world’s fifth largest stock market. According to data compiled from three exchanges, South Korea also overtook India within a week, leaving it behind from sixth place.
It looks like the tables have turned against India.
An electronic screen shows the closing KOSPI index in the lobby of the Korea Stock Exchange in Seoul, South Korea, on June 1, 2026. The benchmark index closed at a record high of 8,788.38, up 312.23 points or 3.68% from the previous session. (Photo: Chris Jung/NurPhoto via Getty Images)
Nurfoto | Nurfoto | Getty Images
About 18 months ago, India’s stock market capitalization was 3.5 times that of South Korea and more than twice that of Taiwan, Bernstein analysts said in a note published Monday.
India has been one of the best-performing markets for almost a decade through 2024, according to Nitin Jain, CEO and director of Kotak Mahindra Asset Management Singapore. In less than two years, the narrative has changed from India “from being the best story to a story that no one even wants to think about,” he told CNBC.
Artificial intelligence and India’s consumption story
Jain said AI is a “very strong theme” and if companies in the sector continue to see earnings growth, investors will not move to other markets.
In Korea since the beginning of the year The Kospi 200 gained over 130%, while Taiwan’s FTSE TWSE 50 outperformed all its Asian peers, gaining over 60%. In sharp contrast, Indian benchmark indices are the only indexes in the red, down over 10%, according to LSEG data..
India has missed the boat on AI, said Venugopal Garre, Bernstein’s managing director and head of India research, speaking to CNBC’s Inside India on Tuesday.
Garre said India does not have an ecosystem for semiconductor manufacturing and on the services side, IT companies are focusing on services and labor arbitrage in new areas, which can be risky and consume a lot of capital.
But despite this, experts say the main reason why global investors are exiting India is not the lack of AI play.
Weak earnings cycle
“Brazil doesn’t have a play on AI, but its markets are doing well,” said Sridhar Sivaram, investment director at Mumbai-based Enam Securities. He said India’s valuations were high, but earnings growth last year was “very modest”.
Indian stocks are currently trading at 21 times forward earnings, similar to Taiwan, while South Korean stocks are trading at nine times forward earnings, according to data from research firm Alpine Macro.
Meanwhile, global brokerage Nomura cut consensus earnings estimates by 4% for the 256 leading Indian companies it tracks for the fiscal year ending March 2027, largely driven by the impact of conflict in the Middle East.
The declining popularity of Indian stocks is also reflected in the MSCI index, in which the country’s weight is calculated. shrank From a peak of around 20 percent in 2024 to around 11 percent.
While some of these headwinds are likely to ease once the conflict in the Middle East ends, some long-term concerns are also undermining investors’ confidence in India’s consumption story.
While advancements in automation and robotics are “diminishing the importance of India’s low-cost workforce as a competitive advantage,” the rapid adoption of artificial intelligence “raises questions about the long-term outlook” for parts of India’s IT industry, according to Yan Wang, Alpine Macro’s emerging markets chief and China strategist.
“Combined with still-rich stock valuations, these factors may continue to limit foreign investors’ enthusiasm even as geopolitical tensions ease,” Wang told CNBC.
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approaching
5 June: Reserve Bank of India monetary policy decision.
June 5: India GDP data for January-March.
