Indian equities have fallen behind their Asian and global peers, with the Nifty 50 ranking second-last only to Indonesia among 18 major markets over the past year, Bloomberg data show.

The Nifty closed at 22,520.45 on Friday, down 10.6 per cent from a year earlier, days after touching an 18-month low. South Korea’s Kospi rose 86.7 per cent and Taiwan’s Taiex 80.6 per cent, leaving the Indian benchmark 97 and 91 percentage points behind. Only Indonesia’s Jakarta Composite, down 26.1 per cent, fared worse.

The gap grew wider over two years, the data showed, as investors who put ₹100 in the Nifty in October 2024 now hold about ₹90. The same sum would be worth ₹255 in the Kospi, ₹218 in the Taiex, ₹176 in Japan’s Nikkei 225, ₹135 in the S&P 500, ₹128 in the FTSE 100 and ₹117 in the Hang Seng, in local-currency terms.

The lag is not limited to Wall Street, where the S&P 500 rose 15.8 per cent in the past year and London’s FTSE 100 10.9 per cent. The Nikkei gained 42.1 per cent and Singapore’s Straits Times 21.7 per cent. Even Hong Kong’s Hang Seng, down 9.5 per cent, and the Shanghai Composite, down 3.1 per cent, fell less than the Nifty.

Korea and Taiwan rode a chipmaker rally on artificial intelligence demand. Samsung Electronics returned 215 per cent including dividends, SK Hynix 352 per cent and Taiwan Semiconductor Manufacturing Company 74.6 per cent. Korea’s 10 largest companies together returned 211 per cent.

India’s heavyweights went the other way. Its 10 most valuable companies returned close to minus 20 per cent, dragged by Tata Consultancy Services, down 34.5 per cent, HDFC Bank, down 34 per cent, Hindustan Unilever, down 30 per cent, and Reliance Industries, down 21.6 per cent. Only about a third of Indian large caps in the Bloomberg sample ended the year higher, against more than four in five in Korea and Taiwan.

The premium India long commanded over its neighbours has narrowed, but not because companies stopped making money. Aggregate profits of the Indian firms in the sample rose about 6 per cent on Bloomberg’s prior-year comparison. Investors are simply paying less for them, and putting their money where the chips are.

India’s large listed companies are now worth $3.67 trillion, less than Taiwan’s $4.59 trillion and barely ahead of Korea’s $3.62 trillion. In dollar terms, the Nifty 50’s market value has shrunk 17.3 per cent in a year to $1.88 trillion.

A February 2 trade deal cut US tariffs on Indian goods to 18 per cent from 50 per cent, but the relief lasted less than four weeks. On February 28, US and Israeli strikes on Iran triggered a war that has since choked shipping through the Strait of Hormuz.

For a country that imports at least 88.7 per cent of its crude, the timing could hardly have been worse. Brent, at $72 before the war, topped $104 this week. Foreign investors pulled a record ₹1.14 trillion from Indian equities in March alone. The rupee has slid to about 96.8 to the dollar, and on Wednesday the Reserve Bank of India raised the repo rate by 25 basis points to 5.5 per cent, its first hike since February 2023.

Korea and Taiwan also import nearly all their oil, but sustained massive gains due to their stakes in the semiconductor chip boom, which gave them an edge over Indian equities.

“The biggest worry for India is that the global oil price is up, and the rupee also depreciated. Hence, the impact has doubled. The rupee has to start recovering, and only then will the FII money come,” said G Chokkalingam of Equinomics Research.

Valuations have fallen with prices. The Nifty trades at 20.3 times earnings, down from 23.6 a year ago, implying its companies’ earnings rose about 4 per cent even as the index fell. The Taiex has risen to 27.9 times from 23.1. The Kospi’s multiple has dropped to 12.1 from 16.6 despite the rally, as profits outpaced prices.

Chokkalingam doubts the chip-led rally will last. “My belief is that the AI boom is not sustainable,” he said, adding that he remains positive on India over the longer term. “So I am very bullish. India will have an excellent future after 3-4 years. But before that, if this war continues for 6 months, we can have one big shock,” he said.