India’s weight in global equity market capitalisation has slipped below the 3 percent mark for the first time in four years, underscoring the pressure facing domestic equities amid foreign investor withdrawals and a sustained reset in valuations. According to data cited in a recent market report, India’s share in global market cap stood at 2.99 percent as of May 11, compared with substantially higher levels seen during the peak of the country’s post-pandemic market rally.

The decline is particularly notable because India had emerged as one of the world’s most favoured equity destinations between 2023 and 2024. During that phase, strong retail participation, resilient economic growth, robust SIP inflows, and optimism around manufacturing and infrastructure expansion pushed Indian equities to premium valuations relative to most global peers. India’s share in global market capitalisation peaked at 4.71 percent in September 2024 before beginning a gradual decline. By the end of December 2024, the figure had eased to around 4.2 percent, and by December 2025 it had dropped further to nearly 3.5 percent.

The correction reflects multiple structural and cyclical factors rather than a single trigger. One of the key drivers has been the moderation in foreign institutional investor participation. Global investors had aggressively increased exposure to Indian equities during the earlier growth cycle, attracted by macroeconomic stability, strong GDP growth, political continuity, and supply-chain diversification themes. However, elevated valuations eventually became difficult to justify amid slowing global growth and tighter liquidity conditions.

Several institutional investors have recently shifted allocations toward markets where earnings growth expectations remain relatively stable but valuations are considerably lower. This has led to a partial rebalancing away from India toward select Asian and developed markets. The impact has been visible particularly in large-cap technology, financials, and consumer-facing stocks that previously traded at significant premiums.

The fall in India’s global market-cap share also comes at a time when corporate earnings growth has begun normalising after a strong multi-year expansion cycle. While India continues to remain one of the fastest-growing major economies, earnings upgrades have become more selective across sectors. Margin pressures, weaker export demand in some industries, and moderation in urban consumption trends have contributed to a more cautious institutional outlook.