In a notable shift in investment trends, Japanese investors are increasingly turning their attention towards Indian equities, signaling a significant departure from the once-favored Chinese market. Recent data reveals a substantial surge in the total assets of India equity-focused investment trusts in Japan, reflecting growing investor confidence in India's economic prospects.
According to a Bloomberg report, the total assets of India equity-focused investment trusts in Japan witnessed an impressive 11% surge in January, amounting to a staggering ¥237 billion ($1.6 billion). Factoring in the favorable performance of Indian stocks on the yen basis last month, estimates suggest inflows of approximately ¥140 billion into India equity funds, significantly overshadowing the lackluster performance of Japanese stock funds.
This pronounced shift in investor sentiment towards India comes amidst a notable decline in flows into Chinese shares, marking the sharpest drop among 14 emerging markets tracked by Japan's data on international investment positions. The trend underscores a growing preference for Indian equities as a compelling investment theme, driven by optimism surrounding the country's economic growth trajectory.
Daiju Aoki, regional chief investment officer at UBS SuMi Trust Wealth Management Co. in Tokyo, highlighted India's allure as the "next China" for economic growth. He emphasized that client interest in Indian stocks transcends individual companies, reflecting a broader conviction in the country's growth potential.
Notably, India's equities witnessed a robust increase in holdings last year, surpassing those of any other developing economy. This upward trajectory in investment activity underscores India's growing prominence as an attractive investment destination, buoyed by favorable economic fundamentals and structural reforms.
The surge in Japanese investment into Indian equities comes at a time when China grapples with economic challenges, including the aftermath of a property bubble collapse and deflation—a scenario reminiscent of Japan's economic malaise in previous decades. Economists forecast India's year-on-year economic growth to outpace China's, with projections indicating an average growth rate exceeding 6% until at least the second quarter of 2025, while China's growth is expected to remain below 5% during the same period.
The increasing flow of Japanese capital into Indian equities not only underscores investor confidence in India's growth story but also signifies a broader recognition of the country's potential as a key driver of global economic growth. As Indian equities continue to shine on the international stage, Japanese investors are poised to play a significant role in fueling the country's journey towards prosperity and development.
