China’s Comeback And Trump’s Bullseye Have Cracked The Nifty And How—As Global Investors Eye Other Shores!

China’s comeback and Trump’s tariffs have cracked the Indian stock markets. Global investors seem to have had a change of heart, and the latest Global Fund Manager Survey by BofA Securities confirms it. The top picks for 2025 are EuroStoxx,  Nasdaq and Hang Seng—noticeably leaving Indian markets out in the cold.

Since October 2024, India has seen over $1 trillion in market capitalization vanish, while China has added a jaw-dropping $2 trillion. The Hang Seng has rocketed 16% in just a month, while the Nifty has dipped by more than 2%, as Foreign Institutional Investors (FIIs) pivot back to China. The reasons? The explosive rise of AI giant DeepSeek, attractive valuations, and strong earnings growth from companies like Alibaba and Lenovo.

Meanwhile, Trump’s “America First” rhetoric has sparked a ‘quit emerging markets’ trend, hitting Indian stocks hard. China’s resurgence has only deepened the wound, fueling the ‘Sell India, Buy China’ trade.

So, what’s driving China’s stock market revival? A combination of economic stimulus, regulatory loosening, and investor-friendly policies. Rate cuts, property sector support, and liquidity infusions have bolstered investor confidence, making Chinese equities an increasingly attractive bet compared to India’s more expensive stocks.

For China, this rally comes after three years of negative returns on the CSI300 index—an era starkly different from India’s uninterrupted nine-year growth streak. The Hang Seng Tech Index, which tracks Hong Kong’s top 30 tech firms, just hit a three-year high, reinforcing the bullish sentiment.

Investors are also reading between the lines after President Xi Jinping’s rare sit-down with business heavyweights, including Alibaba’s Jack Ma. Could this mark a shift away from the regulatory crackdowns that spooked markets in recent years? Many seem to think so.

Adding fuel to the fire, Jefferies’ Chris Wood recently advised global investors to up their exposure to both Europe and China. “GREED & fear will increase the overweight in China by three percentage points in the Asia Pacific ex-Japan relative-return portfolio,” he noted, revealing that the move would come at the expense of allocations to Korea, India, and the Philippines.

Can India Hold The Fort?

Despite China’s stock market comeback, doubts linger. Geopolitical tensions, unpredictable regulations, and an aging workforce continue to cast shadows over its long-term growth prospects. These structural challenges raise the question—how long can China’s stock market rally truly last?

Market expert Sandip Sabharwal remains optimistic about India’s prospects. “India will also start bouncing back. FII flows, in my view, will reverse for most emerging markets soon. Once that happens, India—with an 18–20% allocation—will get its fair share,” he noted. He also sees the current dip as an opportunity for investors to accumulate quality stocks at attractive valuations.

The shift in capital toward China is a near-term headwind for India, but many analysts expect a rebalancing in the coming months. India remains one of the world’s fastest-growing major economies, and its ability to weather global trade shocks could make it a preferred destination for long-term capital once the ‘Sell India, Buy China’ trend loses steam.

Cameron Brandt of EPFR Global echoes a similar sentiment. “There’s a recognition that India still offers solid growth rates. Fund managers are selling to meet redemptions, but that doesn’t mean they’ve soured on India. Since 2022, we’ve seen $130 billion flow into dedicated India funds—some profit-taking was inevitable.”

The Last Bit

The sentiment shift of global investors is clear. As BofA pointed out, investor allocations to China have bounced back after a steep drop last month, while enthusiasm for Indian equities continues to fade, with allocations hitting a two-year low.

For India’s stock market, the road ahead looks uncertain. With China’s comeback gaining momentum and global investors rethinking their bets, the big question is—can India reclaim its spot as a market favorite, or will the ‘Buy China’ wave keep pushing it to the sidelines?