Foreign investors shift focus from India to China

Foreign investors are pulling money out of India and moving it to China. This shift is due to China's strong market performance, mainly driven by gains from companies like AI startup DeepSeek and electric vehicle maker BYD. In the last six months, nearly $29 billion has exited Indian stocks, marking a record withdrawal. China’s financial markets are thriving, with the Hang Seng Index up 36% since last September. Meanwhile, Indian stock indices have dropped 13% from their peak, resulting in a $1 trillion loss in market value. India's economic growth is slowing down, and its corporate earnings have not met expectations, which has discouraged foreign investment. BYD has played a significant role in attracting investor interest. The company's stock has risen 40% this year, boosting its market cap to $165.7 billion. This surpasses the combined value of India’s five largest automakers. BYD’s success is attributed to new ultra-fast charging technology, which improves the attractiveness of electric vehicles. China's tech sector is also seeing a revival, sparked by the launch of DeepSeek's R1 reasoning model. The Hang Seng Tech Index has gained over 35% in 2025. Positive sentiments towards China's tech leadership and the absence of new U.S. sanctions have made Chinese companies appealing to global investors. While India was once projected to be the fastest-growing economy, it is now expected to experience its slowest growth in four years. Corporate earnings have been disappointing, with only a 5% profit growth reported for major firms. Investment firms are adjusting their strategies. Morgan Stanley has reduced its exposure to India to increase investments in China. According to recent surveys, China is now preferred by investors, with India falling behind. Despite some experts believing that foreign funds will eventually return to India, the outlook remains uncertain. Analysts suggest that India's market may stay stagnant in the short term as China continues to draw global capital with its pro-growth policies and technological advancements.