India Faces Pressure as Taiwan Inches Closer in Equity Market Rankings
India is currently feeling the heat in the global equity market, as it stands as the fifth-largest market by capitalisation. This position is under threat, primarily due to the rapid growth of Taiwan’s equity market, driven by a significant surge in the shares of Taiwan Semiconductor Manufacturing Company (TSMC).
This year has been tough for India’s stock market, which is lagging behind many global markets. The major indices, including the Nifty 50 and BSE Sensex, have dropped by approximately 8.5% and 10.8%, respectively. These declines stem from weak annual earnings growth and a limited focus on artificial intelligence investments.
Recent data shows that the total market capitalisation of companies on Taiwan’s stock exchanges reached $4.89 trillion. This is now just shy of India’s National Stock Exchange, which has a market value of $4.92 trillion. Currently, the United States, China, Japan, and Hong Kong hold the top four positions globally.
Decline in Investor Interest
A report from Copley Fund Research highlighted that India is losing its shine among emerging market investors. It stated that India has transitioned from being a favourite to a less attractive option among Asia’s leading economies. The average investment in Indian funds has dipped to 9.94%, marking the first time it has fallen below 10% since January 2021. This is a stark drop from the peak of 17.47% recorded in August 2024.
Taiwan’s AI-Driven Growth
Analysts attribute Taiwan’s growth to heightened interest in AI and semiconductor firms. TSMC shares have soared by more than 44% this year, contributing to a hefty 50.3% rise in Taiwan’s benchmark index. Notably, TSMC represents around 42% of this index, showcasing the importance of semiconductor stocks in Taiwan’s market dynamics.
Geopolitical Challenges for India
Adding to India’s troubles are various geopolitical risks, which have led to increased foreign investment withdrawals. Concerns over oil price fluctuations, the country’s reliance on imported energy, lingering tensions with Pakistan, uncertainties regarding US tariffs, and unpredictable monsoon patterns have all weighed heavily on investor confidence.
This year, foreign portfolio investors have sold off $24.18 billion in Indian stocks, exceeding last year’s record withdrawal. In contrast, Taiwan has attracted nearly $25 billion in foreign investments this year.
India’s Market Representation Declines
India’s shrinking market capitalisation has also resulted in a reduced share in the MSCI Global Standard Index. Its weighting has dropped from 21% in September 2024 to 12.3%. This decline has further impacted inflows into Indian markets, as passive funds continue to reduce their exposure.
Experts suggest that Taiwan’s focused concentration on a few large firms has made it more appealing to foreign investors compared to India’s more diversified market.
As the gap narrows, it raises questions about India’s ability to maintain its position amidst these evolving market dynamics.
