Global brokerage firm CLSA has revised its investment strategy, increasing its allocation to Indian equities to a 20% overweight position, while cutting back on its exposure to China.

What Happened: CLSA's strategic shift is motivated by India’s stable economic conditions and expected foreign inflows.

The adjustment marks a change from CLSA’s previous strategy, which favoured China over India. Despite ongoing foreign investor outflows from India, CLSA sees potential in the market due to its stable foreign exchange environment and strong domestic demand for equities.

China, on the other hand, is grappling with economic challenges such as deflationary pressures and high youth unemployment.

CLSA’s decision comes amid these struggles, with the firm noting that India’s relative insulation from global trade tensions under the US administration adds to its attractiveness as a safe haven.

While India has seen significant domestic equity purchases, CLSA warns of potential risks due to the high volume of new stock issuances, which could impact market liquidity if supply exceeds demand.

See Also: 5 Paranormal Hotspots In India You Shouldn't Miss

Why It Matters: India’s strategic positioning as a manufacturing hub is gaining momentum as global supply chains shift away from China.

Despite recent scrutiny on Chinese firms, India’s former IT Minister, Rajeev Chandrasekhar, had stated that the country remains open to Chinese investments, aiming to attract suppliers to multinational companies like Apple.

Meanwhile, Chinese stocks have struggled due to unmet expectations for a multi-trillion-yuan stimulus package. While Chinese authorities have signalled increased fiscal support, the absence of a large-scale economic package has left investors disappointed. This has further highlighted the economic challenges China faces, making India’s stable environment more attractive to investors.

India’s ambition to surpass Vietnam as Asia’s leading manufacturing hub is a key part of its strategy to become a viable alternative to China.

Read Next: Hero Motocorp Q2 Net Profit Jumps 14% To ₹1,204 Cr, Beats Estimates

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo courtesy: Pixahive