India is hot trade again as investors chase Trump-era winners

Economic Times

16-05-2025

The Nifty 50 index reached its highest point since October. Optimism surrounds a potential US-India trade deal. Corporate India is attracting global investors with significant debt deals. Favorable macroeconomic conditions and a dovish stance from the Reserve Bank of India are boosting the market. Global fund managers are increasingly favoring Indian shares.
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The NSE Nifty 50 Index surged to its highest level since October this week, fueled by optimism that India could be among the first to strike a deal with the US following upbeat comments by Trump. Corporate India has seized the momentum: Shapoorji Pallonji Group secured a $3.4 billion private credit deal, and Reliance Industries Ltd. locked in a $2.98 billion-equivalent loan, underscoring the rising appeal of the nation's corporate debt to global investors.Behind this renewed enthusiasm lies a mix of favorable macroeconomic forces. Policymakers in New Delhi are targeting what they see as a once-in-a-generation chance to integrate the country more deeply into global supply chains. Meanwhile, in Mumbai, the Reserve Bank of India's dovish stance is also supporting the bullish mood — bond yields are trading at their lowest levels in over three years.'India can be a big winner of Trump 2.0 if it plays its cards right,' said Trinh Nguyen, senior economist at Natixis in Hong Kong. 'India does offer both high yield in bonds and decent return on capital for equity investors.'The shift in sentiment has been rapid among global fund managers including those from Franklin Templeton and Federated Hermes. Local shares emerged as the most favored bet among Asian funds managers investing in the region, according to a BofA Securities' recent survey.After selling more than $25 billion of Indian shares between October and February, investors plowed more than $2.5 billion in this quarter despite the trade war-induced volatility and the India-Pakistan clashes. The Nifty gauge was near a multi-month low on April 7 as global stocks recoiled, but is now within 5% of its September record high.Investors are being drawn to India as a relatively safe bet during this period of global trade uncertainty, thanks to the country's more inward-looking economy. Also, since India faces much lower US tariffs versus levies on Chinese goods, it's seen as a viable workaround for companies like Apple Inc.'Amid global trade uncertainties, India's large domestic market, ascending middle class, and prospects of a trade deal with the US will help spur global investors' interest in Indian credit,' said Wei Liang Chang, macro strategist at DBS Group Holdings Ltd.Of course, the outlook isn't risk-free. The unexpected flare-up in hostilities with Pakistan served as a reminder of the geopolitical risks that could complicate Prime Minister Narendra Modi's infrastructure ambitions, which are driving demand for foreign capital across sectors ranging from solar power to roads.Still, for now, investors remain focused on India's improving economic outlook.'The key assumption is for some agreement on a trade deal between the US and India, coupled with good external and internal macro stability,' wrote Michael Wan, a senior currency analyst at MUFG Bank in a note.