India’s share in global market capitalisation has fallen below 3 per cent for the first time in four years as the Indian stock market underperformed compared to several global markets.

Weak earnings growth, expensive valuations, and foreign investor selling contributed to the decline.

India’s weight in the global market capitalisation index dropped to around 2.9 per cent in May 2026 from a peak of 4.2 per cent in December 2024, according to a report by Moneycontrol.

The decline comes after India’s share had steadily increased over the past few years due to strong market rallies and rising retail participation.

In 2026, Indian equities posted a loss of 7 per cent in market capitalisation. While the Sensex declined 11 per cent this year, the Nifty lost about 9 per cent.

The fall is linked to weak corporate earnings in recent quarters. Several sectors, including banking, IT, and consumption, have reported slower profit growth, which affected investor confidence.

Foreign institutional investors have also reduced their exposure to Indian equities in recent months.

Rising geopolitical tensions, high crude oil prices, and concerns about India’s fiscal position have increased risk aversion among global investors.

On the other hand, many Asian peers gained during the same period, triggering FPI selling. China’s share of market capitalisation rose to 9.62 per cent from 8.9 per cent at the start of 2026.

Japan’s share rose to 5.22 per cent from 5.1 per cent, while Taiwan’s jumped from 2.2 per cent to 2.91 per cent.

Analysts said Indian equities continue to trade at relatively higher valuations compared to many other emerging markets.

This has made investors more cautious, especially when earnings growth has not matched market expectations.

India still remains one of the largest and fastest-growing equity markets globally, but sustaining a higher global market share will require stronger earnings growth, continued domestic investment flows, and stable macroeconomic conditions.

Domestic institutional investors and retail investors have continued to support Indian markets despite foreign selling.

However, analysts warned that prolonged weakness in corporate earnings and global uncertainty could continue to pressure Indian equities in the near term.