India slips to fourth in MSCI EM Index weight as South Korea pulls ahead

India is steadily losing weight in the MSCI Emerging Markets (EM) Index as global investors chase artificial intelligence- and semiconductor-led rallies elsewhere, while sustained foreign fund outflows continue to pressure domestic equities.

As of end-January 2026, India’s weight in the MSCI EM Index stood at 13.34%, ranking fourth after China (26.6%), Taiwan (21.04%) and South Korea (15.65%).

The index’s top constituents underscore the dominance of technology-heavy markets. Taiwan Semiconductor Manufacturing

Company (TSMC) alone accounts for 12.5% of the MSCI EM Index, followed by South Korea’s Samsung Electronics at 4.7%. Chinese giants Tencent Holdings and Alibaba Group Holding together command over 7.8% weight.

In contrast, India’s two largest index heavyweights — HDFC Bank and Reliance Industries — together contribute less than 2% to the MSCI EM Index.

TSMC’s influence is particularly striking. With a market capitalisation of $1.72 trillion, the company represents nearly half of Taiwan’s total equity market value and accounts for roughly 15.4% of the MSCI EM Index’s valuation. Taiwan ranks ninth globally with a total market capitalisation of $3.6 trillion, while South Korea stands tenth at $3.3 trillion, according to Bloomberg data.

India, despite being the world’s fifth-largest equity market with a market capitalisation of $5.2 trillion, continues to lag in index representation due to its limited exposure to high-growth technology themes.

Among emerging market peers, India and Indonesia are the only major markets to have underperformed so far in 2026. Indonesia’s equities have been under pressure amid governance and liquidity concerns, following MSCI’s warning of a potential downgrade to frontier market status. India, meanwhile, has seen sustained foreign institutional investor (FII) outflows amid global uncertainty and a weaker earnings outlook.

Since January 2025, overseas investors have sold $21.4 billion worth of Indian equities. Over the past six months, South Korea’s KOSPI has rallied more than 50%, Taiwan’s TAIEX has gained 25.1%, and China’s Shanghai Composite has risen 16% in dollar terms. By comparison, the Nifty 50 has gained just 2%, partly weighed down by a 3% depreciation in the rupee during the same period.

It is worth noting that in September 2022, India had overtaken Taiwan to become the second-largest constituent in the MSCI EM Index, driven by a pandemic-era retail investing boom that pushed domestic indices to record highs.

The MSCI Emerging Markets Index includes large- and mid-cap stocks across 24 emerging economies. With 1,196 constituents, it covers approximately 85% of the free-float-adjusted market capitalisation of each included country.