South Korea has surpassed India to become the world's sixth largest stock market, according to The Economic Times. South Korea's market capitalisation has been up to $5 trillion and India’s to $4.8 trillion.
A Double blow for India
And so Taiwan had already overtaken India just last week and crossed the $5 trillion market cap threshold. India has slipped to the eighth place globally due to the surge in both Asian economies.
What is driving the shift?
The divergence in performance is clear. India's stock market has fallen 8% so far in 2023 due to continued foreign selling and weak corporate earnings. South Korean and Taiwanese markets have roared up to 88% and 58% respectively.
The main driver behind this growth is the artificial intelligence boom. Semiconductor manufacturing firms in both countries have posted record revenue figures in the past few years because of the flood of artificial intelligence demand from global technology companies. South Korea's Samsung Electronics and SK Hynix and Taiwan's TSMC have been the biggest winners of the AI revolution and their domestic indices are now at all-time highs.
Foreign Outflows from India
Meanwhile, Indian markets have been sold off heavily by foreign investors. Between January and May 2026, foreign portfolio investors (FPIs) have pulled $24 billion out of the Indian stock market. High valuations, political uncertainty and a stronger US dollar have driven global funds to shift money to lower-cost or more growth-oriented stocks.
What is ahead?
Market analysts note that although India’s long-term demographic and structural story still holds true, near-term headwinds persist. The remarkable performance of South Korea and Taiwan also provides a reminder of how even a few dollars invested in some thematic sectors such as semiconductors can make a huge difference to the way the market is performing.
In order for India to regain its footing, corporate earnings recovery and a stable policy outlook will be required, as well as foreign investor confidence to be restored. But till now, the AI-driven Asian tigers seem to have seized the momentum.
