After Rs 1.2 Lakh Crore FII Outflow, CLSA Shifts Focus Back to India from China
CLSA, a prominent global brokerage firm, plans to refocus its investment strategy on India following heightened interest in China. The shift comes as the Indian market grapples with significant outflows of Rs 1.2 lakh crore Foreign Institutional Investors (FIIs).
After Rs 1.2 Lakh Crore FII Outflow, CLSA Shifts Focus Back to India from China
According to CLSA's review, the firm has responded to growing concerns about China's economic performance and investor sentiment. As a result, it now believes India has a more promising future than China.
CLSA Relocates from China to India: What Led to the Shift?
Earlier in October, CLSA identified an investment opportunity in China and allocated funds to capitalize on potential equity growth. However, following a 10% decline in both MSCI China and India indices in U.S. dollar terms, CLSA has expressed concern once again. The correction, China's economic challenges and rising trade tensions led the firm to reassess its position.
India’s Potential Amid Global Uncertainty
However, this challenge is unlikely to pose a more significant threat to India than to China. India appears less vulnerable, especially considering the impact of trade tension between the U.S. and China. India's economy is primarily driven by domestic demand, providing it more resilience, whereas China's economy mainly focuses on exports.
CLSA also suggests that India could become a haven for investors seeking stability in foreign exchange, particularly if oil prices remain stable while the U.S. dollar strengthens. Although FLL foreign outflows from India have been occurring consistently since October 2024, CLSA suggests domestic demand in India remains robust, providing a buffer against the impact of foreign selling.
Why is CLSA Taking a Cautious Approach to China and a Positive Outlook on India?
CLSA highlights its growing emphasis on India, noting that valuations in China are less appealing now but remain below those of other emerging markets. CLSA believes the package announced by China at the NPC needs to do more to stimulate growth for this country in the future. Rising inflation in the United States and higher interest rates place incredible pressure on the economy of China and global markets. The strain on the central bank was predictable, limiting its ability to ease monetary policy.
