India's Markets Lose $924 Billion as AI Boom Goes Elsewhere

Indian equities are facing a structural re-evaluation as a global capital rotation into artificial intelligence leaders leaves the nation’s markets behind, erasing $924 billion in value since a peak in September 2024 and threatening its position among the world’s five largest stock markets.

"This is not a dip to be bought," Gary Dugan, chief executive officer at Global CIO Office, said. "The assumption about where these businesses are in ten years has to change."

The country's benchmark Nifty 50 index has fallen nearly 9 percent in 2026, a sharp contrast to the AI-fueled rallies in markets like Taiwan, where the TAIEX has surged 42 percent. Foreign investors have withdrawn a net $21 billion from Indian equities so far in 2026, according to exchange data, pushing foreign ownership to a 14-year low. This capital flight has seen India's weighting in the MSCI Emerging Markets index contract to about 12 percent from a high of nearly 19 percent a year ago.

The reallocation reflects a fundamental challenge for India: its market champions are not the companies powering the global AI buildout. The shift has been compounded by domestic headwinds, including a weakening currency that saw the rupee fall to a record low of 96 against the U.S. dollar, and persistent inflation risks driven by high oil prices.

AI-Driven Rotation Leaves India Behind

The core of the issue lies in the global chase for AI exposure. Trillions of dollars in equity value have been added to markets in Taiwan and South Korea over the past year, home to the semiconductor and memory chip giants that form the backbone of AI infrastructure.

"Markets like the US, Taiwan and Korea are benefiting from the global AI and semiconductor boom, while India does not yet have large AI, chip or global technology companies that can attract similar flows," Sunny Agrawal, head of fundamental research at SBI Securities, said. He noted that capital is being diverted toward companies like Nvidia, SK Hynix, and Samsung, which are reporting extraordinary earnings growth. M&G Investments estimates that roughly two-thirds of the capital that has left India is directly related to AI positioning.

IT Services Face Structural Headwinds

India's formidable $315 billion IT services sector, long a jewel of its economy, is now viewed as a structural vulnerability. The business model of giants like Tata Consultancy Services and Infosys, which relies on building and maintaining systems for global clients, is being threatened by generative AI tools that can automate coding, testing, and back-office functions.

The NSE Nifty IT index has reflected this risk, falling more than 26 percent in 2026 to its lowest level since 2023. The sector's weight in the broader Nifty 50 has shrunk from over 17 percent in early 2022 to about 8 percent. The potential for a structural slowdown in hiring and demand for the nearly 15 million people employed in high-paying IT services jobs could have significant ripple effects on consumption, credit, and the wider financial system.

This article is for informational purposes only and does not constitute investment advice.