India's fifth spot in global market cap list under threat as Taiwan closes in

India’s position as the fifth-largest global market by capitalisation is under threat as Taiwan closes in on the South Asian nation’s spot, powered largely by the rapid rise of chip-making major Taiwan Semiconductor Manufacturing Co.

India’s equity market, low on AI-investment opportunities and plagued with weak annual earnings growth, is one of the worst-performing global markets this year, with the Nifty 50 and BSE Sensex down about 8.5% and 10.8%, respectively.

The aggregate market capitalisation of stocks listed on the Taiwan stock exchange and OTC exchange stood at $4.89 trillion on Tuesday, just shy of the market value of India’s NSE-listed companies at $4.92 trillion, according to exchange data.

The United States, China, Japan, and Hong Kong occupy the top four spots.

“India has moved from being the darling of emerging markets to the runt of the litter among Asia’s Big Four,” global fund-flow and investment trends tracker Copley Fund Research said in its May report.

Average weights in funds tracked by Copley now stand at 9.94%, the first time India has dipped below 10% since January 2021, and a far cry from the highs of 17.47% back in August 2024, the report said.

“The Indian market does not offer direct equivalents to AI trade and companies such as TSMC, Nvidia or large-scale AI infrastructure businesses,” said Manish Bhandari, CEO and Portfolio Manager at Vallum Capital.

TSMC shares have surged over 44% so far in 2026, helping push Taiwan’s benchmark index 50.3% higher this year. The chip stock now accounts for about 42% of the benchmark by market value.

Geopolitical risk is another accelerator of foreign outflows, Bhandari said, citing oil-price volatility and India’s dependence on imported energy, the India-Pakistan tensions, U.S. tariff uncertainty as well as risks from erratic monsoons.

Foreign portfolio investors have offloaded domestic stocks worth $24.18 billion in 2026 so far, surpassing 2025’s record annual sales. In contrast, foreign inflows into Taiwan stood at about $25 billion this year so far.

The fall in India’s market cap is reflected in the decline in its share in the MSCI Global Standard index, which fell to 12.3% from a peak of 21% in September 2024, further curbing inflows as passive funds tracking the index limit their exposure to the South Asian nation’s stocks.

“India is a diversified economy but Taiwan is concentrated on certain companies. These companies are attracting foreign flows at this time,” Tuhin Kanta Pandey, chief of the markets regulator Securities and Exchange Board of India (SEBI), said on Tuesday.