In a significant shift, Japanese investors are redirecting their attention from Chinese markets to Dalal Street, as India emerges as the next economic powerhouse. According to a Bloomberg report, the total assets of India equity-focused investment trusts in Japan experienced an impressive 11% increase, equivalent to ¥237 billion ($1.6 billion), in January. When factoring in the gains of Indian stocks on the yen basis, the data suggests inflows of about ¥140 billion into India equity funds, contrasting sharply with almost no net inflows into Japanese stock funds.
The rise in interest in Indian stocks is attributed to the country being viewed as the next growth frontier akin to China. Daiju Aoki, the regional chief investment officer at UBS SuMi Trust Wealth Management Co. in Tokyo, noted, “Indian stocks are attracting interest as a theme for economic growth, as the next China. Client interest is more about India as a whole rather than individual companies.”
India’s stock holdings saw the most significant increase among developing economies last year, according to Bloomberg’s analysis of government data, factoring in net purchases and asset prices.
This shift in investment comes at a time when China is grappling with the aftermath of a property bubble collapse and deflation—a scenario reminiscent of the economic challenges Japan faced for decades.
Economists are optimistic about India’s economic growth, forecasting an average year-on-year growth rate of more than 6% until the second quarter of 2025. In contrast, China’s growth is expected to remain below 5% during the same period, further solidifying India’s appeal to international investors.
