Wall Street giants are betting on India's future growth potential over China as Beijing's economic performance falters.
Investment bank Goldman Sachs and Morgan Stanley have endorsed New Delhi's economic potential over China, Bloomberg reported on Tuesday.
This realignment in global investment strategies reflects broader geopolitical dynamics, positioning India as a potential counterbalance to China's influence. The country is increasingly viewed as a viable manufacturing alternative, attracting strategic interest from nations like the United States despite criticisms of India's tax policies.
Newsweek reached out to Goldman Sachs and Morgan Stanley for comment via email.
With India now responsible for over 7 percent of the global output of iPhones and investing heavily in infrastructure upgrades, it is clear that the country is becoming an indispensable player in the global economic order.
The movement of funds has catalyzed a veritable gold rush, attracting significant attention from major financial players. Other investment funds such as Marshall Wace, controlling $62 billion in investments, position India as its largest net long bet after the U.S. in its flagship fund.
Similarly, an arm of Zurich-based Vontobel Holding AG has made India its top emerging-market holding, while Janus Henderson Group Plc is on the lookout for fund-house acquisitions in the country. In a notable shift, even Japan's traditionally conservative retail investors are turning their gaze towards India, reducing their exposure to China.
"People are interested in India for several reasons—one is simply that it's not China," Vikas Pershad, Asian equities portfolio manager at M&G Investments in Singapore, told Bloomberg. Pershad underscores a broader sentiment that India represents not just an alternative to China but possesses its own compelling growth narrative.
Investor enthusiasm for India, though not unprecedented, is now more pronounced, with many seeing parallels between today's Indian market and the early days of China's economic boom.
This optimism persists despite the challenges, such as poverty, expensive stock markets, and insular bond markets. Yet, as Pershad notes, "There's a genuine long-term growth story here," driving investors to navigate these hurdles, betting on India's potential despite the risks.
The Bloomberg analysis further reveals that India's economic growth is closely intertwined with the performance of its stock market, with both the GDP and market capitalization increasing from $500 billion USD to $3.5 trillion over the last two decades. This trend suggests that if India continues its growth trajectory of around 7 percent annually, its market size is likely to expand accordingly.
The shift in investment preferences is also evident in the U.S. exchange-traded fund market, where the main fund focusing on Indian stocks saw record inflows in the last quarter of 2023, in stark contrast to the nearly $800 million in outflows from the largest China-focused funds.
Moreover, active bond funds have adjusted their allocations, investing in India for every dollar withdrawn from China since 2022, as per EPFR data.
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Aadil Brar is a reporter for Newsweek based in Taipei, Taiwan. He covers international security, U.S.-China relations, and East Asian ... Read more
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