Seoul: In a significant shift in global financial markets, South Korea has overtaken India to become the world’s sixth-largest stock market, driven by a sharp rally in artificial intelligence (AI)-linked semiconductor companies. The development comes just days after Taiwan moved ahead of India, pushing it out of the top five.
According to data compiled by Bloomberg, South Korea’s total market capitalisation has surged 86% in 2026 to reach approximately $5 trillion (around ₹415 lakh crore). In contrast, India’s market capitalisation has declined to about $4.8 trillion (roughly ₹398 lakh crore), reflecting ongoing pressures on domestic equities.
AI boom fuels South Korea’s surge
The primary driver behind South Korea’s rise has been the global boom in artificial intelligence, particularly demand for high-performance semiconductor chips. Technology giants Samsung Electronics and SK Hynix have played a pivotal role in this rally.
Both companies, key suppliers of memory chips used in AI systems and data centres, have witnessed a sharp increase in their market valuations, recently entering the $1 trillion club. Their performance has significantly lifted the country’s benchmark KOSPI index to record levels.
South Korea’s trajectory mirrors that of Taiwan, where Taiwan Semiconductor Manufacturing Company has been instrumental in boosting market valuations. Together, these economies have emerged as major beneficiaries of the global race to build AI infrastructure.
Domestic reforms add momentum
Beyond the AI-driven surge, South Korea’s stock market has also benefited from policy initiatives and governance reforms. Under President Lee Jae Myung, efforts to improve corporate governance and investor transparency have strengthened market confidence.
The KOSPI index has already surpassed the 5,000-point mark—an earlier target—prompting some global analysts to revise their outlook upwards. The combination of structural reforms and strong technology sector performance has created a favourable environment for sustained capital inflows.
However, analysts caution that the rally remains concentrated in a few large technology firms. The dominance of semiconductor stocks means broader market participation is still evolving, raising questions about long-term sustainability.
Why India is losing ground
While South Korea and Taiwan have capitalised on AI-linked growth, India’s equity markets have faced multiple headwinds. These include foreign investor outflows, a weakening rupee, elevated crude oil prices and slower corporate earnings growth.
India’s benchmark indices have declined by around 11% in 2026 so far, marking a potential first annual drop in nearly a decade. Global funds have reportedly pulled out nearly $26 billion (over ₹2.1 lakh crore) from Indian equities this year, weighing on market sentiment.
Another structural factor is India’s limited presence in the global AI hardware supply chain. Unlike South Korea and Taiwan, India lacks large listed companies directly involved in semiconductor manufacturing or advanced chip production.
This has made it harder for Indian markets to benefit from the ongoing AI investment cycle, which is currently driving global capital flows.
Competition for global capital intensifies
The shift in rankings highlights a broader change in investor preferences. Markets that are closely tied to next-generation technologies, particularly AI and semiconductors, are attracting higher capital inflows.
For global investors, the focus is increasingly on countries that can directly benefit from the AI revolution. This has led to a reallocation of funds towards East Asian economies, which dominate the semiconductor supply chain.
India, despite being one of the fastest-growing major economies, is facing increased competition for global capital as investors reassess growth opportunities.
India’s long-term outlook remains positive
Despite the recent decline in rankings, experts maintain that India’s long-term investment story remains intact. The country continues to benefit from a strong domestic consumption base, favourable demographics and steady economic growth.
According to estimates by the International Monetary Fund, India’s GDP is expected to reach around $4.15 trillion (approximately ₹344 lakh crore) in 2026, more than twice the size of South Korea’s economy at $1.93 trillion.
India’s per capita income has also risen to about $2,810, reflecting gradual economic progress. While inflation and external pressures may create short-term challenges, the broader growth trajectory remains positive.
Conclusion
South Korea’s rise to become the sixth-largest stock market underscores the growing importance of AI-driven industries in shaping global investment trends. As semiconductor giants power its rally, the country has successfully attracted investor attention and capital.
For India, the setback highlights the need to strengthen its position in emerging technology sectors while addressing near-term economic challenges. Although the long-term outlook remains strong, the current shift serves as a reminder that global capital flows are increasingly driven by innovation and technological leadership.