India Out of MSCI EM Top 10: AI Boom Reshapes Global Equity Rankings

In a significant development for global financial markets, India has fallen out of the top 10 constituents of the widely tracked MSCI Emerging Markets (EM) Index for the first time in over two decades, specifically since at least 2000. The Hindustan Times article, published on June 11, 2026, accurately highlights this major shift and its implications for India's economic standing and global investment flows. This unprecedented reshuffling of the MSCI EM Index is largely attributed to the blistering rally in artificial intelligence (AI)-linked stocks, predominantly from Taiwan and South Korea. Companies involved in AI hardware, software, cloud infrastructure, data centers, and semiconductor production in these East Asian economies have experienced massive gains, attracting a disproportionate share of global capital. Giants like Taiwan Semiconductor Manufacturing Company (TSMC), Samsung Electronics, and SK Hynix have seen their shares surge significantly, cementing their dominance in the index. Consequently, India's largest constituents in the benchmark, HDFC Bank and Reliance Industries Ltd (RIL), have slipped to the 11th and 12th positions, respectively, from their previous ranks of seventh and eighth as recently as March. Their individual weightings in the MSCI EM Index have fallen below 0.8 percent following a period of weakness in their share prices this year. This performance contrast is stark: while shares of HDFC Bank and RIL are down around 26% and 20% from their peaks, AI-linked heavyweights like TSMC, Samsung Electronics, and SK Hynix have surged by 48%, 147%, and 194% respectively over the same period. India's overall weight in the MSCI EM Index has consequently declined to a fresh six-year low, reaching approximately 10.87 percent (or around 12 percent by May 2026), nearly half its record level from 2024, when the country briefly emerged as the largest component of an offshoot MSCI EM Investable Market Index (IMI) before China reclaimed the top position. This reduction has been largely concentrated in sectors like BFSI, IT, and FMCG, which typically have significant representation in global indices. The implications of this shift are substantial for global investors. The MSCI EM Index serves as a critical benchmark for passive funds managing more than $700 billion globally, and it is also closely tracked by actively managed EM funds. When a country's weight in the index falls, passive funds are mandated to reduce their holdings proportionally during scheduled quarterly rebalancing events. While active fund managers have more discretion, a reduced index weighting still influences their allocation strategies, as they often benchmark their performance against the index. The AI boom has made EM indices increasingly concentrated, with Taiwan, South Korea, and China together now accounting for roughly 70 percent of the benchmark. Specifically, AI beneficiaries like TSMC, Samsung Electronics, and SK Hynix collectively make up nearly 30 percent of the index, raising concerns about concentration risk within these benchmarks. Taiwan has even surpassed China to become the country with the largest weight in the MSCI Emerging Markets Index early this year, a first in 19 years. Beyond the MSCI EM Index, India has also slipped in broader global market capitalization rankings. Taiwan had overtaken India for the fifth-largest stock market globally in May 2026, with South Korea also rapidly catching up. India currently sits at the seventh position in global market cap country rankings. Reliance Industries, India's largest company, now ranks 109th globally, while HDFC Bank is 181st. Several factors contribute to India's current market challenges. Global funds have aggressively sold Indian equities, with nearly $24 billion flowing out so far in 2026, as investors chase the AI boom in East Asian tech hubs. The Indian rupee has also depreciated significantly against the U.S. dollar, approaching historical lows, which, coupled with rising energy import costs and inflation, has further strained India's financial markets. Experts point out India's limited direct exposure to the AI hardware and semiconductor buildout as a primary reason for its underperformance relative to Taiwan and South Korea, whose economies are heavily invested in these rapidly growing sectors. Despite these shifts, India's underlying economy continues to demonstrate resilience, with a massive domestic economy, a young population, and a strong consumption story. The government is also taking steps to boost domestic semiconductor manufacturing, with approved projects and agreements in place. The current market correction, in relative terms, is seen by some as a signal for where the country needs to focus its economic efforts rather than a verdict on the overall health of the Indian economy.

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