Global Money Is Chasing Indian Stocks Again as Bull Run Extends

(Bloomberg) -- Overseas funds are piling money into Indian stocks, marking a strong return to the $5 trillion market after election-related uncertainty earlier this year triggered a brief hiatus.

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At $8.5 billion, net foreign purchases this quarter are poised to be the highest since the middle of 2023, data compiled by Bloomberg show. With bets on policy continuity restored after Prime Minister Narendra Modi secured a third term in power and India’s weighting surpassing China’s in some global indexes, the outlook for flows looks promising, especially as the Federal Reserve has started cutting interest rates.

The surge in inflows is also a sign of investors’ growing comfort with India’s equity valuation — which is expensive relative to emerging-market peers as well as its own history — as the nation’s benchmark NSE Nifty 50 Index heads for a ninth straight annual gain.

“Despite higher valuations, Indian equities remain attractive relative to other markets where growth prospects are more subdued,” said James Cheo, chief investment officer for Southeast Asia and India at HSBC Global Private Banking & Wealth in Singapore. “India’s growth story is supported by strong corporate performance and favorable economic conditions.”

India has increasingly been touted as the next engine of global growth as China’s economy falters amid a lack of strong stimulus, a property crisis and persistent deflationary pressures. The International Monetary Fund expects India to become the third-largest global economy by 2028, while Bloomberg Intelligence says it can be the top contributor to worldwide growth by then.

The South Asian nation’s gross domestic product expanded 6.7% from a year earlier last quarter. While that fell short of some estimates, it was far ahead of China’s figure of 4.7%.

September looks set to be the fourth straight month of overseas flows into India. Foreigners had offloaded some $1 billion worth of shares in the April-June quarter. While election results in early June showed Modi’s party failed to win an absolute majority, it secured sufficient support from key allies to form a coalition government and return to power.

The MSCI India Index has climbed 7% this quarter in dollar terms, while a broader gauge of emerging-market equities is up about 2%.