Taiwan Overtakes India as World’s Fifth-Largest Stock Market on TSMC Rally

Mumbai | 26 May 2026 

Taiwan has displaced India as the world’s fifth-largest equity market by capitalisation, a milestone that underscores the growing financial weight of artificial intelligence-linked semiconductor manufacturers in global rankings. 

How Did Taiwan Overtake India? 

Taiwan’s total market capitalisation climbed to $4.95 trillion as of Monday, edging past India’s $4.92 trillion, according to data compiled by Bloomberg. The ascent is driven almost entirely by Taiwan Semiconductor Manufacturing Co, which accounts for approximately 42% of Taiwan’s benchmark index. TSMC shares have rallied 49% this year, buoyed by surging demand for its chips from AI infrastructure builders worldwide. 

Taiwan’s financial regulator has also moved in TSMC’s favour. Last month, it raised the ceiling on how much domestic funds can hold in a single stock. Funds investing solely in Taiwanese equities may now hold up to 25% of net assets in any listed company whose index weighting exceeds 10%, up from a previous limit of 10%. TSMC is currently the only listed company that meets that criterion. 

Why Has India Fallen Behind? 

India’s market value has slipped to $4.92 trillion as foreign investors rotated capital toward AI-linked markets. Global funds have sold nearly $24 billion of Indian equities so far this year, chasing semiconductor-driven rallies in Taiwan and South Korea. India’s benchmark index is down 8% in 2026, on course for its first annual decline in over a decade. 

The outflows reflect a combination of pressures: elevated valuations, a weakening rupee, rising energy costs, and a near-absence of domestically listed companies with direct exposure to the AI buildout. India’s weight in the MSCI Emerging Markets Index has contracted to approximately 12%, down from 19% last year. 

Is India Still a Larger Economy? 

The market capitalisation shift does not reflect India’s broader economic standing. India’s GDP stands at $4.15 trillion, according to International Monetary Fund estimates, far exceeding Taiwan’s $977 billion economy. India remains one of the fastest-growing major economies in the world. The divergence between economic size and market capitalisation reflects the degree to which equity valuations are currently tracking AI-sector momentum rather than underlying GDP growth. 

Outlook 

India faces continued pressure from foreign fund outflows and the absence of large-cap AI-linked listings. Higher energy costs have stoked inflation concerns, adding further uncertainty to near-term corporate earnings growth. Taiwan’s regulatory shift, which widens domestic fund exposure to TSMC, is likely to sustain concentration in its benchmark index. 

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