Global capital flows are currently gravitating toward a narrow theme: AI, semiconductors, and large technology platforms. In that backdrop, India has seen a phase of moderated foreign participation, even as domestic fundamentals remain relatively stable.
Between January 2025 and March 2026, foreign portfolio investors were net sellers of roughly $14 billion in Indian equities.
Valuation trends help explain the divergence:
South Korea’s sharp re-rating and Taiwan’s steady expansion reflect strong investor appetite for semiconductor and AI-linked markets. India’s multiple, by comparison, has remained broadly stable to slightly lower.
The composition of the MSCI Emerging Markets Index further illustrates this shift. India’s weight has declined from roughly 19.7% in early 2025 to about 12.8% by March 2026, placing it behind China (23.6%), Taiwan (22.5%), and South Korea (18.1%).
The index is increasingly dominated by technology-heavy names. Taiwan Semiconductor Manufacturing Company alone accounts for approximately 13.42% of the index. Samsung Electronics holds about 6.08%.
India, in contrast, remains more heavily weighted toward financials, domestic consumption, and industrials—sectors with strong structural growth potential but limited direct exposure to the global semiconductor and AI hardware cycle currently driving flows.
This phase appears less about a deterioration in India’s fundamentals and more about global thematic positioning. When global capital concentrates around a specific narrative—such as AI infrastructure and advanced chip manufacturing—markets most directly linked to that theme tend to outperform.
India’s long-term structural story remains intact. However, in a cycle dominated by technology and semiconductor leadership, relative sector composition is influencing short-term capital allocation decisions.
Subscribe on LinkedInPlease note that the above should not be construed as an advice from us. Our company is in the business of distribution of suitable Financial Products to investors describing product specifications, material facts and the associated risk factors. We are acting as a Distributor for these products and facilitating transactions.