MSCI Inc.

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Slightly Bullish +15

BT Explainer: Why no Indian stock in top 10 MSCI EM Index - First time in 26 years

📉 No Indian stock is in the top 10 MSCI EM Index constituents for the first time in 26 years.

💻 Taiwan and South Korea have replaced India as the primary beneficiaries of the AI chip boom.

📊 TSMC alone accounts for 14.46% of the index weight, holding 90% of advanced AI chip production.

💸 Foreign investors withdrew Rs 2,76,178 crore from India in 2026 and Rs 1,66,286 crore in 2025.

📈 The IT sector comprises 43.1% of the MSCI EM index constituents by weight.

🇨🇳 China holds a 20.36% weight in the index, more than double India's 10.87% share.

🏦 HDFC Bank and Reliance Industries have slipped to the 11th and 12th spots respectively.

🔋 Memory prices have increased six-fold over the past year due to supply constraints.

📅 The MSCI EM Index delivered a 33.57% return in 2025 and 25.61% in the first five months of 2026.

⚠️ Analysts warn that while AI earnings momentum is secular, positioning in the sector is crowded.

Bullish Signals
  • The global AI and semiconductor boom has driven market cap and profits to record 34% and 32% CAGR respectively in 2024 and 2025.
  • Earnings for global AI and chip manufacturing companies are expected to clock a 46% CAGR over the next two years, indicating durability.
  • The MSCI Emerging Markets Index has delivered exceptional returns of 33.57% in 2025 and 25.61% in the first five months of 2026.
  • Supply-demand reset in memory sectors like DRAM and HBM is creating a durable growth cycle rather than a normal upturn.
  • Valuations for AI-led markets appear moderate on a forward basis, with nearly half of current levels supported by strong earnings upgrades.
Risk Factors
  • India has gone off the foreign investor radar due to being perceived as a non-AI play compared to Taiwan and South Korea.
  • Earnings growth forecasts for Indian equities (16-17% for FY27) are described by analysts as aggressive.
  • The AI sector is noted to be crowded and vulnerable to periodic profit booking despite healthy delivery.
  • India's benchmark market cap has remained stagnant since its peak in September 2024, failing to capture recent global momentum.
Full Analysis
For the first time in 26 years, no Indian stock appears in the top 10 constituents of the MSCI Emerging Markets Index by weight. This shift is attributed to the artificial intelligence boom reshaping the emerging-market landscape, with Taiwan and South Korea emerging as new leaders driven by surging demand for AI chips. Consequently, India has moved off the primary radar of foreign investors, evidenced by significant outflows totaling Rs 2,76,178 crore in 2026 alone and an additional Rs 1,66,286 crore in 2025. Taiwan Semiconductor Manufacturing Company (TSMC) dominates the index with a 14.46% weight, accounting for 90% of advanced AI chips and nearly 70% of overall chip production. Other key technology constituents include Samsung (7.78%), SK Hynix (6.60%), MediaTek, Delta Electronics, and Hon Hai Precision. Collectively, seven technology companies comprise 33.44% of the top 10 index weight, while the IT sector represents 43.1% of all constituents in the $12.80 trillion benchmark. In contrast to the AI-driven growth in Asia, Indian equities face skepticism regarding aggressive earnings growth forecasts of 16-17% for FY27. While Morgan Stanley notes that memory prices have risen six-fold due to supply constraints and durable demand, India's market cap has stagnated since its September 2024 peak. The MSCI EM index delivered strong returns in 2025 and the first five months of 2026, but India ranks fourth with a weight of only 10.87%, significantly trailing China at 20.36%.