India's stock market has lost about $924 billion in market value since reaching its peak in September 2024, marking a sharp decline amid shifting global investment trends [1, 2]. This drop threatens to push India out of the world's top five stock markets by market capitalization for the first time in three years [1, 3, 2].
Global investors are increasingly focusing on AI-related sectors such as chip manufacturing, computing infrastructure, and AI models. India has few corporate champions in these areas, limiting its exposure to the fastest-growing segments of the market [1, 3, 2]. Domestic markets remain heavily concentrated in financials, consumer sectors, traditional industries, and IT services, with little presence in AI infrastructure or chip supply chains [2].
India’s weight in the MSCI Emerging Markets Index has fallen sharply from about 19% last year to around 12% currently, reflecting reduced foreign investor interest. Foreign holdings in Indian equities are near a 14-year low [2]. Foreign capital outflows since the end of 2024 have amounted to approximately $42 billion [2].
The country’s IT services sector, led by firms like Infosys and Tata Consultancy Services, faces structural risks as AI automation threatens traditional outsourcing revenue streams in coding, testing, customer support, and enterprise processes [2]. The Nifty IT index has dropped over 26% year-to-date in 2026, reaching its lowest point since 2023. Its share of the Nifty 50 index has shrunk from over 17% in early 2022 to about 8% today [2].
Economic growth expectations have also cooled. India's GDP growth forecasts for 2027-2028 stand near 6.5%, down from averages above 8% over the past four years [2]. Profit growth for Nifty 50 companies in 2027 has roughly halved since early 2026 [2]. Rising oil prices and a weakening rupee have increased import inflation and worsened foreign capital outflows [2].
Despite India's large talent pool and its sizeable digital economy, few leading Indian firms are directly engaged in AI infrastructure development [1, 3, 2]. This limits the market’s ability to attract investment pivoting towards the technology and semiconductor industries.
Reports from May 17, 2026, confirm India's impending removal from the top five global stock markets amid these AI-driven sector shifts [3]. The market continues to adjust as investors seek opportunities in AI and related technologies worldwide.
