New Delhi: India has emerged as a contrarian investment opportunity within the emerging market universe as the ongoing rally in the asset class become increasingly concentrated around semiconductor companies, according to a report.
The report by DSP Netra said that the MSCI Emerging Markets (EM) Index has recovered to levels last seen in 2021, but the rally has been driven by a narrow set of markets and stocks.
Among the four markets with index weights exceeding 5 per cent. India is available at a discount of 2.39 per cent to its long-term average valuation.
In contrast, Taiwan and South Korea are trading at premiums of about 85 per cent and 71 per cent, respectively, above the MSCI Emerging Markets Index’s overall premium of 24.71 per cent.
The report said Taiwan and South Korea have significantly outperformed other emerging markets this year.
It attributed the sharp outperformance of Taiwan and South Korea to the global artificial intelligence (AI)-driven semiconductor boom rather than a broad-based improvement in emerging market fundamentals.
Technology’s weight in the MSCI Emerging Markets Index rose from 28.3 per cent in December 2025 to 44.2 per cent in May 2026, while the share of most other sectors, including communication services, consumer cyclical and healthcare, declined.
The report noted that technology alone contributed 25.6 percentage points to the benchmark’s 25.3 per cent year-to-date return. Nearly 72 per cent of the index’s gains came from just three semiconductor companies — Taiwan Semiconductor Manufacturing Co. (TSMC), Samsung Electronics and SK Hynix — which together account for around 30 per cent of the benchmark.
According to DSP, such concentration increases the vulnerability of the MSCI Emerging Markets Index to any reversal in investor sentiment towards AI and semiconductor stocks.
Against this backdrop, the report described India as one of the most attractive contrarian opportunities in emerging markets, noting that despite recent underperformance, the country continues to enjoy relatively stronger macroeconomic fundamentals while trading close to its long-term average valuations.
If investor participation broadens beyond technology stocks, India could witness renewed capital inflows, the report added.
(IANS)
