According to Bloomberg on October 2, the continuous fall of Chinese stocks has turned the world’s attention to its biggest opponent India in a way that has never been seen before.
The MSCI India Index in the last quarter reached almost 10%, while the MSCI China Index tumbled 23%. India’s gauge outperformed China’s by 33%, indicating the biggest gap between the two nations since March 2020.
The Chinese stock market has witnessed a loss of $5 trillion since early 2021 due to a strict “Zero-COVID” policy, brutal regulatory clampdowns, and geopolitical tensions with the West. This is the biggest drop since July 2016.
As a result, India, with the most rapid economic growth in Asia, has become the next appealing destination for global firms.
Indian stocks kept hitting record highs thanks to an unprecedented boom in retail investment. The MSCI India Index has injected another $300 billion into the domestic stock market following the highest surge earlier this year.
Nick Payne, a London investment manager for global emerging-market equities at Jupiter, said that Beijing’s “draconian lockdowns continue to impact these supply chains, so the clamor for an alternative has been rapidly gaining favor.”
He added, “India is the key candidate to fill that role, in an approach that’s been dubbed China+1.”
Bloomberg noted that India is trying to broaden its onshore market to survive potential global recession better than other rising markets. Moreover, China’s separation from the U.S. will likely create more opportunities for Indian firms to expand their global influence.
Cameron Brandt, director of research at Massachusetts-based think tank EPFR Global, said that Global EM Fund distributions to India are now at their peak. Meanwhile, those to China are just picking up slightly from a sharp fall in the last few quarters.
Additionally, Jupiter Asset Management has India as its largest holding in some of its emerging-market funds. M&G Investments (Singapore) Pte has also made a “greater allocation” to the country this year.
Vikas Pershad, a fund Manager at M&G Investments, said, “The increasing allocation of investor capital both to India-only and to Asia ex-China funds hints that this shift is still in its early stages. Some of the barriers to investing in China appear to be structural and longer lasting than expected.”
Economists in a Bloomberg survey estimate India’s economy will increase about 7% in the financial year ending next March. This is more than twice China’s growth rate this year.
Bloomberg reported on October 3 that India is planning a mega project to help the country grab factories from China and compete with the world’s second-largest economy.
The new project is called PM Gati Shakti, or the strength of speed in Hindi. It is expected to invest 100 trillion rupees, or $1.2 trillion.
Under the project, the Indian government will create a digital platform that unifies 16 ministries for seamless approvals. It will also offer businesses and investors a one-stop solution for the design of projects and easier estimation of costs.
So far this year, leading international firms have also utilized the country’s industrial prowess.
Apple Inc., which has produced most of its iPhones in China, started making its new iPhone 14 series in India right after a successful manufacturing rollout. Moreover, Citigroup Inc. has chosen India as one of its best global markets to expand business operations.
Mark Mobius, co-founder of Mobius Capital Partners, believes that India will develop faster than China in the coming years due to its big and younger community, along with a good environment for private firms.