Indian Stock Market Draws Increasing Interest from South Korean Investors

By IndraStra Global News Team

Cover Image Attribute: The file photo of Bombay Stock Exchange

South Korean investors are increasingly turning their attention to the rapidly growing Indian market, drawn by the impressive returns offered by equity funds focused on India, which have outperformed those based on US and Japanese stocks. In June, India’s stock market achieved a significant milestone by reaching a total value of $5 trillion, positioning itself among the world’s largest markets alongside the US, China, and Japan, and closely rivaling Hong Kong. This remarkable growth has made India an attractive destination for investment, as local investors seek to capitalize on its expanding economic potential.

Despite the promising opportunities, foreign direct investment in India still faces challenges related to registration and taxation. As a result, many South Korean retail investors are opting to engage with the Indian market through indirect investment channels, such as fund products. According to data from market intelligence firm FnGuide, released on August 1, India-focused funds operating in South Korea have attracted assets totaling 1.08 trillion won ($788 billion) this year. This influx represents the second-largest regional investment after the $5.53 trillion inflow into US-focused funds.

The performance of India-tied funds has been particularly notable, achieving the highest profit rate among regions with a 25.49 percent return this year. This impressive performance surpasses returns from US funds (21.04 percent), Russian funds (13.61 percent), Vietnamese funds (12.85 percent), Japanese funds (11.17 percent), and European funds (8.28 percent). As a result, exchange-traded funds (ETFs) that track Indian companies are also experiencing increased asset inflows. By July, individual investors had net purchased 394 billion won in India-focused ETFs, reflecting a strong and growing interest in India's economic prospects.

Currently, seven India-focused exchange-traded funds (ETFs) are listed on the Korea Exchange, reflecting a growing interest in India's economic prospects. Five of these ETFs track the Nifty 50 index, which serves as a key benchmark for the Indian stock market. The remaining two are thematic ETFs: one focuses on India's prominent Tata Group, while the other targets companies in the consumer goods sector. This diverse range of ETFs highlights investors' enthusiasm for capitalizing on India's economic potential, driven by its substantial population of over 1.4 billion people.

Akshay Zutshi, Vice President at Lighthouse Canton, a Singapore-based asset management firm specializing in the Indian market, has identified several sectors that offer promising investment opportunities. These include healthcare and insurance, renewable energy, residential real estate, and infrastructure and manufacturing. Zutshi noted that while Indian equities may trade at a premium compared to other emerging markets, this is justified by India's superior growth prospects and strong financial fundamentals, such as high cash flows, low leverage, and robust return on equity.

Despite the inherent risks associated with emerging markets, experts believe the Indian stock market is well-equipped to manage volatility. Manish Jain, Director of International Business at Mirae Asset Capital Markets (India) Private Limited, a subsidiary of Korean asset manager Mirae Asset Securities, highlighted that the Indian market has demonstrated resilience against both external and internal shocks. Jain noted that the market has shown a capacity to recover swiftly from downturns, though global factors such as geopolitical tensions, the US presidential election, and Federal Reserve monetary policies, as well as domestic regulatory changes, could pose risks.

Looking ahead, the outlook for the Indian economy remains highly optimistic. Jain pointed out that India is currently the fastest-growing economy in the world and ranks fifth globally in terms of nominal GDP, trailing only the US, China, Japan, and Germany. According to projections from global investment banking firm Jefferies, India is expected to surpass Germany and Japan within the next three to four years, potentially becoming the third-largest economy. This positive long-term outlook underscores the significant investment opportunities within the Indian market.

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