Kospi Falls Over 40%; Can India Attract Rotating Capital?

South Korea’s Kospi has dropped more than 40% from its June record to below 5,550, Economic Times Markets reported on October 23, raising the possibility that investors retreating from concentrated artificial-intelligence bets could consider India’s more diversified equity market.

The potential benefit for Dalal Street remains an analyst assessment, not an established shift in investment flows. India has faced substantial foreign selling of its own, alongside higher oil prices and rising bond yields; the report put the Sensex’s decline this year at 15%.

Chip concentration magnifies Korea’s reversal

The Kospi had gained more than 122% from the start of the year before reaching roughly 9,386 in June, according to the report. Its subsequent reversal followed a cooling of enthusiasm for AI-linked investments.

Samsung Electronics and SK Hynix together accounted for just over half of the benchmark, the report said. That concentration left the index heavily exposed to changes in sentiment towards the two chipmakers. The account also pointed to single-stock leveraged exchange-traded funds tied to the companies as a possible amplifier of risk, rather than establishing their precise contribution to the fall.

Vaqarjaved Khan, senior fundamental analyst at Angel One, attributed the severity of the sell-off to the combination of chip-stock concentration and retail leverage.

India’s appeal rests on diversification

Khan contrasted Korea’s concentrated benchmark with Indian indices, which he described as spanning roughly 13 sectors. He also said domestic institutions continued to absorb foreign selling.

Between October 6 and 14, the Kospi fell 13.5%, while the Nifty declined less than 1%, according to the report. Khan argued that this relative resilience could appeal to global investors reallocating capital.

Sunny Agrawal, head of fundamental research at SBI Securities, similarly said a retreat from AI-related investments could benefit diversified Indian indices through investment flows, though only to some extent.

The report also described a reversal in the fortunes of Indian IT shares: after suffering earlier in the year as AI enthusiasm gathered pace, they became beneficiaries as that trade weakened. Analysts framed this relative positioning as an “anti-AI” advantage amid scrutiny of large technology companies’ infrastructure spending.

Foreign outflows remain the key caution

Khan nevertheless cautioned against treating Korea’s downturn as a rescue for Indian equities. Foreign investors had withdrawn more than ₹2.87 lakh crore from India during the year so far, according to the report.

His advice was to favour sectors supported by domestic demand, avoid leverage and monitor foreign institutional investment flows before concluding that market conditions had turned. The distinction is important: a more diversified benchmark may attract interest, but the reported figures do not yet establish that money leaving Korean equities is entering India.