Foreign Investors Shift Focus from India to China

Recent trends show a significant movement of foreign portfolio investors (FPIs) from Indian stock markets to Chinese equities. In early March 2025 alone, FPIs net sold Indian stocks worth $3.5 billion, with substantial selling in the information technology and consumer goods sectors. This shift is attributed to worries about economic conditions in both the United States and India, marking the largest outflow in any six-month period since October.

China's Rising Appeal to Foreign Investors

Meanwhile, China's Hang Seng Index in Hong Kong has seen a 36% rise since late September, fueled by artificial intelligence investments centred around Chinese venture DeepSeek. This has led to a significant shift in investment patterns between these two major Asian economies, with foreign investors moving their investments to Chinese equities at an unprecedented rate.

India's Stock Market: A Path to Recovery?

Despite the current downturn, Indian equity benchmark indices BSE Sensex and Nifty50 have shown signs of a smart comeback, with equity investors' wealth surging by Rs 22.12 lakh crore during a five-day stock market rally. The shift from a selling stance to net buying by FIIs, influenced by accommodative signals from the US Federal Reserve, has reignited optimism in the domestic market.

Long-Term Prospects of the Indian Economy

Market experts express confidence in the long-term prospects of the Indian economy and its markets. India's GDP growth of 6.2% in the third quarter and the RBI's decision to cut repo rate signal that the worst of the slowdown is over. With India predicted to continue as the world’s fastest-growing major economy, the country's robust long-term outlook presents a compelling buying opportunity in Indian equities.