India's stock market has dropped to 6th position globally for the first time in three years, marking a significant shift in the country's investment landscape. The country stands out as one of the biggest losers as the artificial intelligence trade reshapes global investment flows. Without the AI-driven rallies powering Taiwan and South Korea, there's a growing risk that India falls further behind rather than regaining lost ground. As per NDTV Profit, the rationale goes far beyond Indian equities being relatively expensive or corporate earnings slowing, with global investors now chasing themes the country's market largely lacks: chip manufacturing, computing infrastructure and AI models.
Global investors have sold approximately $51 billion in Indian equities by April 2026, cutting their holdings to $670 billion from $930 billion since September 2024, according to latest reports. Foreign ownership of Indian shares is now at its lowest since 2012, with foreign investors abandoning the country at an accelerating pace. This sell-off has lowered India's weighting in major global indexes like the MSCI Emerging Markets and ACWI by over 30%. Importantly, this has led to a structural change: domestic investors now own more of India's listed companies than foreign investors for the first time in more than 20 years, as reported by Goldman Sachs Group Inc. calculations.
The NSE Nifty IT Index has crashed nearly 40% from its December 2024 peak, making it one of the worst-performing sectors in 2026. The latest selloff came after OpenAI announced a major AI deployment push backed by more than $4 billion, triggering concerns that artificial intelligence could disrupt the traditional outsourcing business model followed by large Indian IT firms. Investors fear that AI could automate software testing, coding, and billing based on employee headcount, potentially reducing dependency on large offshore teams that have historically been the backbone of India's outsourcing industry. Major IT stocks have been severely impacted, with HCL Technologies declining over 22%, Infosys falling 14.45%, and Tata Consultancy Services down more than 10% in the last month alone. As per NDTV Profit, the IT industry's Nifty weight has fallen to about 8% from more than 17% in early 2022, though the sustainability of that growth remains in question given the structural impact on employment.
India's $4 trillion consumer-driven economy is already experiencing a hiring slowdown, with major firms like Oracle cutting jobs. According to Reuters, this trend could spread globally as AI adoption accelerates. The hiring slowdown in India's consumer sector adds another layer of concern to the broader economic outlook, particularly as the country's growth model increasingly relies on domestic consumption and services. As many as 15 million Indians work in IT services and global capability centers, many in some of the country's best-paying private jobs, making a structural slowdown in hiring or fundamental shift in global demand for services a significant concern for the broader economy.
Gross domestic product will likely expand 6.5 per cent in 2027 and 2028 each after an average annual rate of 8.3 per cent in the last four years, the International Monetary Fund predicts. However, earnings growth estimates for companies in the benchmark Nifty 50 in 2027 have roughly halved since the start of the year. The change in India's fortunes has been stark, with the country's market value soaring from pandemic lows to a record $5.73 trillion in September 2024, when the NSE Nifty 50 Index was the world's best-performing major market. Since that peak, $924 billion of market value has evaporated, with India's weight in the MSCI emerging markets index falling to about 12% from 19% last year. As per NDTV Profit, the rotation has been largely toward Korea and Taiwan, which provide a sharp contrast with their AI-powered equity benchmarks up 78% and 42% this year, respectively, while India's gauge is down more than 9% heading for its first annual drop after a decade of gains.
