Source: ET
Context:
In May 2026, the Taiwan Stock Exchange has overtaken India to become the world’s fifth largest stock market. Taiwan’s total market capitalisation has reached USD 4.95 trillion, while India’s stands at USD 4.92 trillion, a small but symbolically important gap. The shift has happened even though India has a higher Gross Domestic Product (GDP) than Taiwan, and is driven by two main forces. First, an Artificial Intelligence (AI)-led semiconductor boom has lifted Taiwan’s market, particularly Taiwan Semiconductor Manufacturing Company (TSMC), whose shares have surged about 45 to 50 per cent in 2026 alone and which now makes up nearly 42 per cent of Taiwan’s Taiex index.
Market capitalisation:
| Market | Capitalisation |
|---|---|
| Taiwan Stock Exchange | USD 4.95 trillion |
| Indian Stock Market | USD 4.92 trillion |
New Global Top 7 Stock Markets:
| Rank | Country |
|---|---|
| 1 | United States |
| 2 | China |
| 3 | Japan |
| 4 | Hong Kong |
| 5 | Taiwan |
| 6 | India |
| 7 | South Korea |
Background Concepts
What is “Foreign Portfolio Investment (FPI), and How Does It Affect Markets?
Foreign Portfolio Investment (FPI) refers to investment by foreign investors in financial assets of another country, including listed stocks, bonds, and derivatives, without seeking management control of the underlying companies. FPI flows are typically short-term and volatile, often driven by interest rate differentials, currency expectations, global risk sentiment, and index weights. In India, FPIs are registered with the Securities and Exchange Board of India (SEBI) under the SEBI (Foreign Portfolio Investors) Regulations, 2019, and are categorised into Category I and Category II. When FPIs invest, stock prices and the rupee tend to rise; when FPIs withdraw money (called outflows), stock indices fall, the rupee weakens, and bond yields can rise. The 2026 FPI outflows from India are one of the key reasons behind the country’s slip in the global stock market ranking, even as domestic mutual funds and SIP investors continue to provide a strong domestic buffer.
Practice MCQs
Q1. With reference to the recent ranking of global stock markets, consider the following statements:
- Taiwan Stock Exchange has overtaken India to become the world’s 5th largest stock market.
- Taiwan’s market capitalisation has reached around USD 4.95 trillion, slightly higher than India’s USD 4.92 trillion.
- The shift is driven mainly by an AI-led semiconductor boom and the rally in TSMC shares.
- India remains ahead of Taiwan in terms of overall Gross Domestic Product.
How many of the above statements are correct? (a) Only one (b) Only two (c) Only three (d) All four (e) None
Q2. Consider the following statements about the factors behind India’s relative slip in the global stock market ranking:
- India has faced Foreign Portfolio Investor (FPI) outflows in recent months.
- India’s weight in the MSCI Emerging Markets Index has been reduced.
- High valuations and a limited number of large AI-linked listed firms have weighed on Indian markets.
- India’s overall GDP is now smaller than Taiwan’s GDP.
Which of the above are correct?
(a) 1, 2 and 3 only (b) 1, 3 and 4 only (c) 2 and 4 only (d) 1 and 4 only (e) All four
Answers
- Q1. Correct Answer: (d) All four
- Q2. Correct Answer: (a) 1, 2 and 3 only
