85 sovereign wealth funds and 57 central banks, representing USD 21 trillion in assets, claim that India has surpassed China as the most alluring emerging market for investment. The ‘Invesco Global Sovereign Asset Management Study’ research featured opinions from 142 chief investment officers, heads of asset classes, senior portfolio strategists, and representatives from 85 sovereign wealth funds and 57 central banks.
Investors are readjusting their portfolios in the face of persistently high inflation and real interest rates. According to the report, sovereign wealth funds favour fixed income and private debt, while emerging markets (EMs) with strong demographics, stable governments, and aggressive regulation, particularly India, have become popular places to invest.
“Among the Emerging Markets, India has piqued sovereign investors’ interest, overtaking China,” it added
“India has now overtaken China as the most attractive Emerging Market for investing in Emerging Market debt.” A development sovereign fund based in the Middle East noted, “We don’t have enough exposure to India or China. However, India is a better story now in terms of business and political stability. Demographics are growing fast, and they also have interesting companies, good regulation initiatives, and a very friendly environment for sovereign investors.”
With the help of “friend-shoring” and “near-shoring,” which enhance foreign business investment in response to both domestic and global demand, India is one of many nations, along with Mexico and Brazil, that are reaping the rewards. According to the report, South Korea and India continue to be the most alluring locations for gaining exposure in EM markets.
Gold and developing market bonds are seen as safe investments in such a scenario. This change may have been precipitated by the West’s decision to freeze nearly half of Russia’s $640 billion in gold and foreign exchange reserves in retaliation for the invasion of Ukraine.
Although FDI inflows declined unexpectedly by 22% to USD 46.03 billion in FY23 despite rising inflation and recessionary patterns in developed nations, India’s manufacturing PMI did not decline during the last year.
