Taiwan Overtakes India as World’s 5th Largest Stock Market: AI Boom, TSMC Growth, and Key Reasons Behind India’s Slide

Context

Taiwan has overtaken India in terms of total stock market valuation and emerged as the world’s 5^th largest equity market. Taiwan now ranks behind only the U.S., mainland China, Japan, and Hong Kong, while India has slipped to the6^th position.

Read Also: UPSC Daily Current Affairs 2026

Key Driver Behind Taiwan’s Rise

• Dominance of TSMC: Taiwan’s surge has been driven primarily by the exceptional growth of Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest semiconductor manufacturer.
• Impact of AI Boom: The rapid expansion of Artificial Intelligence (AI), data centres, and advanced computing technologies significantly increased global demand for semiconductors, boosting Taiwan’s market valuation.

Why India Fell Behind?

External Factors Domestic Factors

• Shift in Global Capital Flows: Global investors increasingly shifted investments towards AI-driven technology markets and semiconductor-focused economies such as Taiwan.
• Foreign Portfolio Outflows: Foreign investors sold nearly $24 billion worth of Indian equities during the year, putting pressure on Indian market capitalisation.
• Geopolitical Uncertainty: US-Iran geopolitical tensions and global uncertainties adversely affected investor sentiment in emerging markets, including India.

Domestic Factors

• Rising Energy Costs: Higher energy prices contributed to inflationary pressures and increased production costs.
• Weakening Rupee: Depreciation of the Indian rupee reduced investor confidence and affected foreign investment inflows.
• Moderating Corporate Earnings: Slower growth in corporate earnings weakened overall market momentum.
• Limited AI Ecosystem Exposure: India currently has relatively fewer globally dominant companies directly linked to the AI and semiconductor ecosystem compared to Taiwan.

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