Global fund managers have shifted their focus from India to China, spurred by China's recent stimulus package aimed at reviving its economy, according to a survey by BofA Securities. Following China's central bank's aggressive monetary support measures in September and its pledge to increase debt, growth expectations for China have surged.
This policy shift has attracted global investors, resulting in a significant increase in China allocations at the expense of Indian equities. The survey revealed that participants believe this round of policy adjustments in China signals a real change, prompting them to refocus on the Chinese market after seeking opportunities elsewhere.
The shift has had a noticeable impact on Indian markets, with foreign investors pulling out nearly US$8 billion from Indian equities in October, marking the largest outflow since March 2020. This exodus has contributed to a 5% decline in India's Nifty 50 index from its record high in late September. High valuations in Indian equities, with a price-to-equity ratio of 24 times, compared to China's 10.7 times, have also raised caution among investors.
China's equity market, on the other hand, has become more attractive due to its lower valuations and the expectation of further stimulus, drawing significant capital flows from global fund managers.
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