India’s biggest companies have been pushed out of the top 10 of the MSCI Emerging Markets Index for the first time in more than two decades, a symbolic setback for a market that had spent years selling itself as the most durable growth story in the developing world.

No Indian company now features among the benchmark’s 10 largest constituents, Business Standard reported, citing MSCI data.

HDFC Bank and Reliance Industries Ltd, long the country’s most prominent representatives in global emerging-market portfolios, slipped to 11th and 12th place, respectively.

The change is a measure of how violently the artificial intelligence trade has reordered global equity markets.

The MSCI Emerging Markets Index is now dominated by Taiwan Semiconductor Manufacturing Co. (TSMC), Samsung Electronics Co. and SK Hynix Inc., companies sitting at the center of the global AI hardware supply chain.

MSCI data as of 29 May showed TSMC with a 14.46% weight in the index, followed by Samsung Electronics at 7.78% and SK Hynix at 6.60%.

Tencent, Alibaba, MediaTek, Delta Electronics and Hon Hai Precision also feature in the top 10.

That leaves India in an uncomfortable position. It remains the world’s fastest-growing major economy, but its listed market has few companies with comparable scale or earnings leverage in the AI hardware supply chain.

Reuters reported that India’s equity market has slipped to seventh place globally by market capitalization after being overtaken by Taiwan and South Korea, both of which have been lifted by AI-linked semiconductor stocks.

Foreign investors have pulled about $26.4 billion from Indian equities so far in 2026, Reuters said, after record outflows in 2025.

India had benefited for years from a powerful mix of China underweighting, domestic liquidity, earnings optimism and policy stability. Global funds looking for exposure to consumption, financialization and infrastructure found few markets with India’s depth. That helped push Indian valuations to a premium over most emerging-market peers.

That premium is now harder to defend.

Indian equities still trade at a premium to many emerging-market peers, making weaker earnings momentum harder for foreign investors to ignore.

Multiple risks

Earnings growth has been weak, the rupee has been under pressure, and rising energy costs have added a fresh macro risk for a country that imports most of its crude oil. Benchmark Indian equities have lagged Taiwan and South Korea this year as the AI trade pulled capital toward semiconductor-heavy markets.

The market has scale, liquidity and a domestic investor base strong enough to absorb foreign selling. What it lacks is a listed corporate champion in the AI supply chain with the global pricing power of TSMC, the memory dominance of SK Hynix or the hardware relevance of Samsung, analysts said.

India’s listed technology companies are still largely services companies. Tata Consultancy Services Ltd, Infosys Ltd, HCL Technologies Ltd and Wipro built global franchises by supplying software services, consulting and outsourcing support to international clients. Those businesses can benefit from AI adoption, but they are not the primary producers of the chips, high-bandwidth memory, foundry capacity or advanced hardware that investors are now rewarding.

AI has turned market leadership into an infrastructure story. Investors are paying for companies that can supply the compute layer, not just companies that can help clients use it. Taiwan and South Korea sit closer to that value pool. India sits closer to the demand and services layer.

That gap is now visible in index weights.

The exit of Indian companies from the MSCI EM top 10 does not mean global investors have abandoned India. Domestic mutual funds, insurers and retail investors continue to provide a large pool of support. Monthly systematic investment plans have turned domestic households into a steady buyer of equities, cushioning the market during foreign outflows.

But domestic liquidity cannot fully offset the loss of global relative appeal. Foreign funds benchmarked to MSCI indices care not only about India’s absolute growth, but about how Indian stocks compare with other emerging-market opportunities.

When Taiwan and South Korea offer direct AI exposure and stronger earnings momentum, India’s valuation premium becomes more vulnerable.

The concentration risk in emerging markets has also increased. TSMC alone now accounts for more than 14% of the MSCI EM Index, a weight larger than many country allocations.

The top three chip-linked names, TSMC, Samsung and SK Hynix, together represent nearly 29% of the benchmark. That makes emerging-market investing more dependent on a narrow AI hardware cycle than the label suggests.

For India, this can cut both ways. If the AI trade continues, passive flows into emerging markets are likely to keep favoring Taiwan and South Korea over India. If the AI rally corrects, India’s more diversified market could regain relative appeal, especially if earnings improve and the currency stabilizes.

Semiconductor leadership takes decades of manufacturing depth, supply-chain discipline, capital intensity and ecosystem maturity. India’s opportunity lies instead in the second-order infrastructure around AI: power, data centers, cooling, connectivity, construction, electronics assembly and enterprise deployment.

That is where India may still capture part of the AI cycle. The country’s power demand is rising, data-center investments are expanding, and large industrial groups are positioning themselves around digital infrastructure. Those businesses may not command the same index weight as TSMC, but they could create a broader investment theme if earnings follow.

Global capital is rewarding proven AI cash flows today, not long-dated national potential. India’s growth story remains large, but it is being measured against markets already generating AI-linked earnings.

That makes the shift in MSCI EM leadership more than a ranking change. It is also a warning that India’s market leadership cannot rest only on demographics, GDP growth and domestic liquidity. Those remain powerful supports, but they are insufficient when global equity leadership is being driven by technology depth and exportable innovation, analysts added.