Global brokerage firm Jefferies said India continues to remain an important market for emerging market investors even after its weight in the MSCI Emerging Markets Index dropped sharply.
Jefferies strategist Christopher Wood said the recent “reverse AI trade” has reduced India’s MSCI EM weighting to its lowest level in nearly six years. India’s share in the index has now fallen to around 11.5%.
At the same time, Taiwan has become the biggest market in the MSCI EM Index with a weight of nearly 25%. Chip giant TSMC alone now holds a 14.2% weight, which is even higher than India’s total country allocation in the benchmark index.
Christopher Wood reduced India’s allocation to 12% in his Asia Pacific ex Japan portfolio. However, he still kept India in the overweight category while increasing exposure to South Korea and Taiwan due to the strong rally in AI and semiconductor stocks.
Foreign Institutional Investor ownership in Indian equities has also dropped sharply. According to a research report by JM Financial, FII ownership declined to 14.7% in April 2026, the lowest level seen since June 2012.
Domestic Institutional Investors continued to increase their presence in the market. DII ownership climbed to a record 18.9%, highlighting stronger domestic participation despite foreign selling pressure.
Sectors such as IT, BFSI, and FMCG witnessed the highest foreign outflows. Data showed that 10 out of 16 sectors recorded net FII selling during the past 12 months as investors shifted money toward AI driven markets like South Korea and Taiwan.
South Korea’s KOSPI index has surged nearly 78% so far in 2026, supported by strong gains in companies like Samsung Electronics and SK Hynix amid the global AI memory boom.
TSMC reported a 58% jump in Q1 net profit and also raised its full year revenue guidance. The company’s market capitalization has now reached around $1.7 trillion, strengthening investor interest in semiconductor focused markets.
According to reports, FIIs have pulled more than Rs 2 lakh crore from Indian equities in 2026 and redirected a large portion of those investments toward South Korea and Taiwan.
Economists have also warned about rising risks for the Indian economy due to higher crude oil prices. Speaking at Groww’s India Investor Festival in Mumbai, economists Mishra and Chinoy said sustained crude oil prices above $100 per barrel could create deeper economic challenges for India.
India imports nearly 85% of its crude oil requirements. Analysts estimate that every $10 per barrel increase in crude prices can raise India’s annual import bill by nearly $12–15 billion, increasing pressure on the current account deficit.
The Indian rupee has already crossed 95 against the US dollar despite interventions by the Reserve Bank of India. Meanwhile, Standard Chartered expects India’s current account deficit to widen to 2.5% of GDP in FY27 if oil prices remain elevated.
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