India's weightage in the MSCI Emerging Markets Index has been reduced to 12 per cent following a shift in global investor focus toward semiconductor markets, according to a Jefferies Greed & Fear report. The country's weighting dropped from 19.5 per cent to 11.5 per cent since the start of last year, while Korea's weighting increased to 20.6 per cent and Taiwan's rose to 25 per cent. Despite this reduction, India has not been completely eliminated from emerging market investment portfolios, as reported by Jefferies.
Indian mid-cap stocks have demonstrated strong resilience, with the Nifty MidCap 100 Index rising 19.2 per cent from its April 2 low to reach a peak of 62,094, significantly outperforming the broader market despite significant foreign capital outflows. According to Jefferies, this performance occurred while foreigners sold a net $21.1 billion of Indian equities year-to-date, already exceeding the record $18.8 billion in net selling recorded throughout last year. The mid-cap segment's 97 per cent climb since January 1 substantially outpaced the Nifty Index's 34 per cent gain during the same period.
Domestic equity mutual fund inflows provided crucial support against foreign selling pressure, with inflows accelerating to ₹500 billion in March, marking the highest level in eight months. As reported by Jefferies, Systematic Investment Plans (SIPs) accounted for ₹321 billion of this total, while the National Pension Scheme contributed approximately $1.7 billion per month into equities during the first quarter of 2026. This domestic support helped offset the impact of foreign capital outflows on the broader market.
The shift in global investor focus toward semiconductor markets has created what Jefferies terms a 'reverse AI trade,' with investors favoring companies like Samsung and Hynix, which are forecast to earn profits totalling W452tn ($307 billion) this year, three times the total forecast profits of $102 billion for India's Nifty 50 universe. According to the report, this benchmark shift has resulted in adjustments to the Asia Pacific ex-Japan relative-return portfolio, with India's weighting reduced by one percentage point while Korea and Taiwan's increased to 18 per cent and 21 per cent respectively.
