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India’s benchmark Nifty 50 index is down about 5 percent from its record high in the last week of September. (Photo: Shutterstock)
Global fund managers increased their allocation to China at the expense of India after Asia’s largest economy launched a stimulus package, according to a survey by BofA Securities.
Last Saturday, China pledged to significantly increase its debt to revive its ailing economy. China’s central bank announced the most aggressive monetary support measures since the pandemic in September.
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“Growth expectations for China have come back to life after the policy change,” BofA Securities said in a note on Tuesday.
“(Survey) participants believe this time is different, as they abandon their search for opportunities elsewhere and turn to China.”
Their renewed focus on China came at the expense of their allocation to Indian stocks, according to the BofA survey.
Foreign investors have withdrawn nearly $8 billion from Indian stocks so far in October, on track to be the biggest outflow since March 2020, at the height of pandemic fears.
In August, a large number of fund managers were overweight on India compared to those who were underweight. They have now changed their position, according to the investigation.
The survey did not specify whether they had moved to under- or neutral-weighting.
The change in mood toward China comes as analysts warn investors about the high valuations of Indian stocks, which have struggled due to an exodus of foreign capital.
India’s benchmark Nifty 50 index is down about 5 percent from its record high in the last week of September.
At the same time, China’s key stock index hit its highest level in more than two years last week.
“The Chinese market has become particularly attractive in terms of valuation, and this, combined with the expectation of stimulus measures, has attracted capital,” said Trideep Bhattacharya, president and chief investment officer for equities at Edelweiss Asset Management.
India’s 12-month forward price-to-stock ratio is 24 times higher, or about 23 percent higher than the average over the past 10 years, according to BofA. China’s is 10.7 times higher, or about 7 percent lower than the long-term average.
(Only the title and image of this report may have been reworked by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
(Only the title and image of this report may have been reworked by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First publication: October 16, 2024 | 2:42 p.m. STI