China’s Investment Momentum Outpaces India’s Economic Aspirations
India’s investment attractiveness has waned, with a 13% market decline as China’s market flourished, buoyed by tech and stimulus initiatives. BYD Co’s stock has surged, while India’s auto sector struggles. Global investors are shifting their focus to China, complicating India’s recovery efforts in the foreign investment arena.
India’s investment appeal has diminished recently, attributed to slowing corporate earnings and a lackluster economic forecast, while China’s market experiences a surge fueled by technology advancements and substantial government incentives. The Hang Seng Index has appreciated by 36% since late September, contrasting sharply with India’s decline of 13% from its peak, leading to a significant loss of $1 trillion in market capitalization.
According to V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, “The hopes of a growth revival in China, coupled with cheap valuations, have triggered foreign capital inflows into Chinese markets.” This influx has prompted foreign institutional investors to retract their stakes from emerging markets, especially as India’s higher valuations come under scrutiny.
Chinese electric vehicle manufacturer BYD Co has notably led this momentum, with shares soaring by 40% in 2025, propelling its market valuation to $165.7 billion, eclipsing the total value of India’s leading automotive companies. In contrast, India’s automotive sector has not fared well, with a 6% drop in combined market value among its top automakers to $151.5 billion.
Chris Wood, Global Head of Equity Strategy at Jefferies, stated, “China is also outperforming year-to-date, which creates its own pressure on active managers.” Consequently, he has increased investments in Chinese corporations such as BYD, Alibaba, and Tencent while reducing exposure to Indian industrial entities.
The rise of artificial intelligence has also contributed significantly to China’s investment attractiveness. Following the unveiling of AI startup DeepSeek’s R1 reasoning model, the Hang Seng Tech Index surged over 35% in 2025. Furthermore, the endorsement of tech firms by President Xi Jinping, along with a lack of new U.S. sanctions, has enhanced investor confidence in China’s tech landscape.
Currently, the MSCI China Index has realized a nearly 24% increase in USD terms, outperforming the MSCI AC World Index, which experienced a mere 0.3% downturn.
India’s anticipated growth trajectory has, meanwhile, become clouded, with forecasts indicating it may expand at the slowest rate in four years. Recent corporate earnings reports revealed minimal profit growth among Nifty 50 companies, marking three consecutive quarters of disappointing performance.
Global investment firms are responding promptly to these developments. Morgan Stanley has adjusted its investments by reducing its Indian portfolio in favor of increasing positions in Chinese assets. Similarly, Jefferies has lowered its investment in India and South Korea to boost exposure to Chinese equities.
The latest Bank of America Asia Fund Manager Survey indicates a shift in preference, placing China as the second-most favored market after Japan, while India now ranks alongside Indonesia and South Korea.
Looking ahead, strategists suggest that India’s market may continue to oscillate within a defined range as it seeks to regain foreign investors’ interest amid China’s accelerating growth. V.K. Vijayakumar expressed that, “the market is likely to move in a range in the near term without a sharp breakout or breakdown,” underscoring the urgency for India to enhance its investment appeal as competition intensifies from China.
The article highlights a significant shift in investment dynamics in Asia, with China currently attracting substantial foreign capital due to its economic recovery and advancements in technology, particularly in the electric vehicle sector. Conversely, India is experiencing stagnated growth and declining market valuations. This scenario poses challenges for India as it strives to regain investor confidence amid rising competition from China, whose favorable policies and technological innovations are redefining the investment landscape.
Original Source: m.economictimes.com
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