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The “Buy China, Sell India” trade strategy is gaining traction due to the rise of DeepSeek, a Chinese AI model, and delayed Trump tariffs. DeepSeek’s success has attracted global investors, boosting confidence in Chinese stocks. The MSCI China index outperformed the MSCI India index, with returns of 28.9% and 38% over the past six months and one year, respectively.
China’s government initiatives, cheap equity valuations, and technology advancements have kept foreign capital invested in the country. In contrast, Indian equities have seen continuous outflows, with $405 million in redemptions last week alone. Meanwhile, China received $573 million in foreign portfolio investments, the largest inflow since October 2024.
The Chinese central bank’s measures, including rate cuts and funding for equity purchases, have restored confidence in the country’s economic landscape. These actions have led to record foreign institutional investor (FII) outflows from India, as global fund managers shift their focus to China.
This trend highlights the shifting sentiment towards China and the challenges faced by Indian equities. Investors are now more inclined to invest in Chinese stocks, driven by optimism around AI advancements and favorable government policies.
