Investors are diverting billions of dollars away from China and redirecting their focus towards India, with major financial institutions like Goldman Sachs Group and Morgan Stanley endorsing India as the primary investment destination for the coming decade.
Marshall Wace, a $62 billion hedge fund, has positioned India as its largest net long bet after the United States in its flagship hedge fund. Similarly, an arm of Zurich-based Vontobel Holding AG has made India its top emerging-market holding, while Janus Henderson Group Plc is considering acquisitions in the Indian fund market. Even traditionally conservative retail investors in Japan are increasingly favoring India over China, according to a report by Bloomberg.
Vikas Pershad, Asian equities portfolio manager at M&G Investments in Singapore, explained, “People are interested in India for several reasons — one is simply it’s not China. There’s a genuine long-term growth story here.”
Aniket Shah, global head of environment, social, and governance practice at Jefferies Group LLC., noted that a recent investor call about India was one of the firm’s most well-attended, indicating a strong interest in understanding India’s investment landscape.
Under Prime Minister Narendra Modi’s leadership, India has significantly expanded its infrastructure in a bid to attract global capital and divert supply lines away from Beijing.
In the US exchange-traded fund market, the primary fund investing in Indian stocks received record inflows in the final quarter of 2023, while the four largest China-focused funds combined saw outflows of nearly $800 million. EPFR data shows that active bond funds have allocated 50 cents to India for every dollar they withdrew from China since 2022.
A report from Rhodium Group revealed that in 2023, US and European firms shifted their investments away from China to other developing markets, with India being the primary recipient of this redirected foreign capital, followed by Mexico, Vietnam, and Malaysia. This trend persists despite China’s increasing share of global growth, underscoring concerns among foreign investors regarding China’s business environment, economic recovery, and political climate.
The report also highlighted a significant increase in announced US and European greenfield investment in India, which surged by approximately $65 billion or 400% between 2021 and 2022. In contrast, investment in China dropped to less than $20 billion last year, down from a peak of $120 billion in 2018.
