India’s position as the world’s fifth-largest equity market is coming under pressure as Taiwan, riding a blistering artificial intelligence-led rally in semiconductor stocks, closes in rapidly on Indian market capitalisation amid domestic concerns over slowing earnings growth and economic uncertainty from an extended West Asia conflict.
The combined market capitalisation of companies listed on Taiwan’s stock exchange and OTC market stood at nearly $4.89 trillion on Tuesday, only marginally below the $4.92 trillion valuation of companies listed on the National Stock Exchange (NSE), according to data compiled by Reuters.
Bloomberg data showed that Taiwan had briefly overtaken India on Monday, with its market value touching $4.95 trillion against India’s $4.92 trillion. The US, China, Japan and Hong Kong occupy the top four positions in global equity market rankings.
Taiwan’s dramatic rise has been powered by the stellar performance of chip giant Taiwan Semiconductor Manufacturing Co (TSMC), whose shares have surged over 43 per cent so far this year. The company now accounts for roughly 42 per cent of Taiwan’s benchmark index, underlining the extraordinary concentration driving the island nation’s stock market gains.
At the heart of the rally is the global AI boom. TSMC manufactures cutting-edge chips for nearly every major AI hardware company, including Nvidia, AMD and Broadcom, making it one of the biggest beneficiaries of the worldwide rush into AI infrastructure.
“Taiwan’s rising market capitalisation is fundamentally a reflection of its heavy concentration in tech hardware, which is at the centre of the AI investment cycle,” said Yi Ping Liao, fund manager at Franklin Templeton. “Markets with limited exposure to tech hardware are being overshadowed by technology-heavy markets such as Taiwan and Korea.”
India, by contrast, has struggled to participate meaningfully in the global AI equity boom. The Nifty 50 and BSE Sensex have fallen 8.5 per cent and 10.8 per cent, respectively, this year, weighed down by elevated crude prices, foreign fund outflows and concerns over weakening corporate earnings.
Analysts said the prolonged conflict in West Asia has pushed up energy prices, hurting India’s import-dependent economy and energy-sensitive sectors. Domestic IT stocks have also come under pressure from fears that rapid advances in generative AI could compress margins and reduce traditional outsourcing demand.
“India’s lower exposure to AI hardware and the narrow, concentrated nature of the global AI rally have limited participation, thereby overstating overall market weakness,” analysts at Motilal Oswal said in a note.
The current situation marks a sharp reversal from the optimism expressed earlier this year by chief economic adviser V. Anantha Nageswaran, who had argued in February that India’s lack of an “AI story” in equity markets could eventually become an advantage by insulating the country from speculative excesses.
“From what was seen as a handicap in 2025 — the lack of an AI story in the Indian capital market — may turn out to be an advantage when it comes to 2026 in terms of capital flows,” Nageswaran had said.
Seeking to downplay comparisons with Taiwan, Sebi chairman Tuhin Kanta Pandey on Tuesday said the structure of the two markets was fundamentally different.
“India is a very diversified market. In Taiwan, there are concentrated stocks. Specific companies like TSMC are critical to the global electronics supply chain and are attracting significant flows,” Pandey said at an event in Mumbai.
The debate over India’s place in the global AI ecosystem has also intensified internationally. At the World Economic Forum in Davos earlier this year, Eurasia Group president Ian Bremmer described India as part of a “second grouping” of AI powers trailing the global leaders.
Union minister Ashwini Vaishnaw, however, rejected that assessment, citing Stanford University rankings that placed India third globally in AI competitiveness behind only the US and China.