China market turmoil proves a blessing for India
Foreign investors are shifting to Indian stocks as they are less exposed to slowing growth in the mainland than their emerging-market peers
The tumult in China's stock markets has turned into a blessing for Indian shareholders.
International investors are pulling out of China, fuelling record outflows through the Shanghai-Hong Kong exchange link, amid a US$3.9 trillion plunge in mainland equity values since June 12. They have ploughed US$705 million into India over the same period, sparking a world-beating 7 per cent gain in the benchmark S&P BSE Sensex index.
China's interventionist response to the rout - including unprecedented trading restrictions - has prompted foreigners to shift their equity exposure to India, according to hedge fund Alexander Alternative Capital. The US$2 trillion economy, which got a fresh boost from tumbling crude prices this month, is less exposed than its emerging market peers to slowing growth in China, Aquarius Investment Advisors says.
"The recent travails in China make India seem like an oasis of calm in terms of volatility," Jonathan Schiessl, the head of equities at Ashburton Investments, which oversees US$12 billion, said in an e-mail. The fund has cut its exposure to China by 1 per cent in the past month to invest in Indian equities and raise its cash position, he said.
Gains in Indian shares over the past six weeks mark a turnaround from the preceding four months, when China's bull market and doubts over Prime Minister Narendra Modi's economic policies kept foreigners away. The Sensex tumbled 11 per cent from this year's peak on January 29 to June 12, making it the world's worst performer after Egypt.
Those concerns have been allayed by the biggest jump in indirect tax receipts in May since 2011, which gives Modi ammunition to boost expenditure. A 12 per cent decline in Brent crude prices this month has also pared government subsidy bills in a country that imports about three-quarters of its oil.