Market in China slows, investors consider India as a better alternative

Bloomberg Market Live pulse survey

India has been termed as one of the highly profitable economies for investment in Asia, according to the Bloomberg Markets Live pulse survey. This comes after China’s market has slowed down recently, allowing investors to gaze upon the Asian financial market with a new lens and bring forward three regions for competing allocations.

According to NDTV, Kieran Calder, the head of equity research for Asia at Union Bancaire Privee in Singapore, the reason why India has a more compelling investment case is that there is a better transmission of GDP growth into earnings growth and a better track record of delivering consistent earnings, alongside “a supportive geopolitical environment.”

A few days ago, Mark Mobious, one of the most prolific emerging markets investor,  also stated that India is increasingly becoming a preordained choice for global investor’s. On April 9, he cited this change as a result of China’s slowing down economy and identified India’s potential growth across sectors like infrastructure and public sector undertaking (PSU) firms in a dialogue with CNBC-TV.

“With China slowing down, India is going to be taking up the slack in terms of manufacturing and exports. So India is in a very good position. There is no question about it,” Mobius said. 

However, despite the positive talks, there is yet to be a noticeable change in investment from China to India. 

BofA Global Fund Manager Survey

Last year, Bank of America’s (BofA) Global Fund Manager Survey view of the global economy revealed that India’s weightage in the index had hit an all time high of 18.2 per cent. This was held against China, whose performance of the year had been underwhelming and it’s weightage would fall to 25.4 against the 26.6 recorded in the past. 

In simpler terms, a weightage in an index represents the percentage of that total index allocated to a particular country’s stocks. This means that the higher the weightage, the larger the influence it has on the overall performance of the country’s stocks. This means that while India’s weightage has increased, China’s has decreased— depicting, as is above stated, an underwhelming performance for the year-to-date calendar. The shift in weight reflects the changing dynamics of the two market economies, India and China, in the global investor community’s perspective. 

However, even according to the BofA survey, Japan remains a favourite among investors, with it’s weightage being cited at a net 56 per cent. 

Investment trends in India

According to Mark Mobius, investment prospects in India can be found within mid and small-cap companies. He has identified these companies as ‘promising opportunities’ for investors. He also highlighted the potential of infrastructural changes in railways and airlines, projecting them to be fast growing sectors. He also mentioned the importance of keeping an eye on the PSU firms, especially those involved in infrastructure. 

Mobius highlighted, however, the need to double down on the technology hardware sector. “As people want to diversify their supply chain away from China, India can take up that slack considering it has got the population and capability,” Mobius said.

Prime Minister Narendra Modi’s upcoming general elections manifesto also includes a promising acceleration of the nation’s economy. Mobius has expressed trust in this, especially for investor’s, because his possible re-election will mean that Modi will continue to push for technological development alongside strengthening infrastructure. 

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