India has emerged as a unique investment prospect in the emerging market landscape, contrasting with the focus on semiconductor companies in the current market surge, as per a report by DSP Netra. The MSCI Emerging Markets (EM) Index has rebounded to 2021 levels, but the upswing is centered on specific markets and stocks.
Among the four markets with index weights exceeding 5 percent, India stands out with a 2.39 percent discount to its long-term average valuation. In contrast, Taiwan and South Korea are trading at premiums of approximately 85 percent and 71 percent, respectively, above the MSCI Emerging Markets Index’s overall premium of 24.71 percent.
The report highlights Taiwan and South Korea’s substantial outperformance compared to other emerging markets this year. This exceptional performance is attributed to the global artificial intelligence (AI)-driven semiconductor boom rather than a broad-based enhancement in emerging market fundamentals.
The weight of technology in the MSCI Emerging Markets Index surged from 28.3 percent in December 2025 to 44.2 percent in May 2026, while most other sectors, such as communication services, consumer cyclical, and healthcare, saw a decline. Notably, technology alone contributed 25.6 percentage points to the benchmark’s 25.3 percent year-to-date return, with three semiconductor giants — Taiwan Semiconductor Manufacturing Co. (TSMC), Samsung Electronics, and SK Hynix — responsible for nearly 72 percent of the index’s gains.
The report warns that the concentration on AI and semiconductor stocks heightens the MSCI Emerging Markets Index’s susceptibility to any shift in investor sentiment. In this context, India is identified as one of the most appealing contrarian opportunities in emerging markets. Despite recent underperformance, India maintains robust macroeconomic fundamentals and trades near its long-term average valuations. The report suggests that if investor interest broadens beyond technology stocks, India could experience renewed capital inflows.
