Foreign portfolio investors (FPIs) have withdrawn around Rs 2.6 lakh crore from India in 2026, and most of that capital will go into global AI semiconductor development through Samsung and SK Hynix in Korea, and TSMC in Taiwan. Now, with tech trading under severe pressure, the question is whether Korea’s pain will provide the structural medicine to revive the Indian bulls.
But market experts warn against viewing the sudden drop in South Korean stocks as an automatic value play. The index’s vulnerability arose directly from extreme concentration and historical levels of retail leverage.
Monarch CEO Gaurav Bhandari is skeptical that Korea’s decline will make it a bargain. “The argument that Korean stocks have become ‘cheaper’ after the crash is misleading,” he said. “A market that falls 18% after rising 200% is not cheap, it is less expensive than its peak. That is something very different.”
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The real story, according to his account, is how narrow the recovery was at first. The Kospi’s rise was based almost exclusively on two stocks (Samsung and SK Hynix) that together represent 52% of the index. Retail margin debt had risen to a record 37.74 trillion won.
When the AI semiconductor trade reversed, that concentration became a liability. The market fell violently enough to trip the circuit breakers. “This is not a sign that the market offers value,” Bhandari said. “It is a sign of concentration, leverage and fragility.” Instead, it points to India’s broader income base. The Nifty 500 delivered 15.6% earnings growth in FY26, spread across banking, consumer, infrastructure, IT and pharma, with no sector dominating the way semiconductors dominate the Korea index. “India’s returns may not be as dramatic in a single year,” he said, “but they are much more sustainable.”
Tanvi Kanchan, associate director at Anand Rathi Share & Stock Brokers, rejects the idea that money moves to India automatically. Context, he maintains, is everything.
Despite being in the bear market, KOSPI remains one of the best performing major indices in the world this year.
What seems like an exodus, in your reading, is actually portfolio management. As Korean stocks rose, their weightings in global and emerging market benchmarks rose sharply, forcing many active fund managers to trim positions just to stay within risk limits. That assumes a rebalancing of about $62 billion by the end of May, he said, “not a direct exit.”
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Even after the rally, valuations have not expanded as the price chart suggests. The Kospi is trading at around 7 times forward 12-month earnings, the cheapest since the global financial crisis, because earnings estimates have been revised sharply upwards. Consensus now expects EPS growth to triple by 2026.
“The Korean correction makes India relatively more attractive from a risk-reward perspective, but it will not automatically redirect flows until AI semiconductor trade peaks or stabilizes, and until India’s own earnings delivery gives global allocators a concrete reason to return,” Kanchan said.
That “concrete reason” has been missing so far and the magnitude of what India has lost this year clearly demonstrates it. India’s total FPI outflows in 2026 will amount to about ₹1.92 lakh crore, Kanchan said. Most of that capital has gone to Samsung and SK Hynix in Korea, and TSMC in Taiwan, the three names at the center of global AI semiconductor development.
But she sees that the seeds of a reversal are already in place. Once the AI capital spending supercycle peaks and markets start to question whether all that infrastructure spending is actually translating into profits, she expects capital to shift toward markets with strong domestic demand, low correlation to global technology cycles, and a credible multi-year growth story. India, he says, offers that combination in a way that few emerging market peers can match.
She points out two specific triggers to watch out for. First: a spike in the global semiconductor cycle. “The moment SK Hynix and Samsung start acting more cautiously, the crowded AI trade will look for outlets, with India likely to be a prime destination,” he said.
Secondly, a reset in the valuation of Indian stocks that has already partly occurred. The Nifty 50 is down about 10% year-to-date, and India is now one of the biggest underweights in global emerging markets portfolios, with a benchmark weighting of just 15.25% in the MSCI Emerging Markets Index.
“Historically, slight overseas positioning is a setting for strong re-entry when the macroeconomic context changes,” Kanchan said. On that basis, it believes India is well positioned to be the biggest beneficiary of a post-AI business rotation, with domestic growth, market stability anchored in SIP, a credible reform narrative and historically light external positioning already in place.
(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. They do not represent the views of The Economic Times)