India, China Lose Ground In AI Race As Market Leaders Weaken

China, India and Hong Kong are the only major stock markets where the largest listed companies now make up a smaller share of overall market value than they did a year ago, highlighting how the three markets are missing out on the artificial intelligence-driven rally that has reshaped global equities. According to Bloomberg-compiled data, the top 10 companies account for around 19% of total market capitalisation in both China and India, down from 26% and 22%, respectively. In Hong Kong, the figure slipped to 9.8% from 10%.

India's benchmark indices have also struggled this year, with the Nifty 50 declining around 8% amid weaker performance from heavyweight stocks. Unlike markets such as Taiwan and South Korea, India lacks a dominant AI-linked company capable of lifting the broader market.

Why Are India And China Falling Behind?

The contrast has become more visible as AI-focused companies have driven markets elsewhere in Asia. Taiwan's benchmark has surged 54% this year, powered largely by chipmaker Taiwan Semiconductor Manufacturing Co. Meanwhile, South Korea's Kospi index has nearly doubled, supported by the AI memory leaders SK Hynix and Samsung Electronics.

Market experts noted that Asia's concentration story is split. AI and semiconductor leaders are pushing market concentration higher in technology-heavy economies, while India, China and Hong Kong are seeing the opposite because none has produced a dominant AI winner.

India's biggest listed companies continue to be traditional businesses such as Reliance Industries and HDFC Bank. Even technology giants like Tata Consultancy Services and Infosys remain focused on software services, a segment many investors believe could face disruption from AI.

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Could A Broader Market Be An Advantage?

Not everyone views lower market concentration as a weakness. Another observer said India's diversified earnings base and strong domestic investor participation could help cushion the market if enthusiasm around AI stocks fades globally.

China presents a slightly different picture. While the market's top companies have lost share, investors are increasingly shifting towards AI-linked firms such as Cambricon Technologies, SMIC and Yangtze Optical Fibre & Cable. At the same time, money is also flowing into banks, insurers, state-backed dividend stocks and hardware manufacturers.

That broader participation has helped China's CSI 300 Index gain around 5% this year despite the declining dominance of its largest companies, suggesting that falling market concentration does not always signal weaker market performance.

Source:

Moneycontrol