S.Korean retail investors rush to buy Indian stocks on dips

South Korea's mom-and-pop investors have upped their stake in Indian stocks, hoping that Donald Trump's return to the White House will boost the South Asian country's economy.

On Thursday, India’s BSE Sensex ended down 1.06% at 79,541.79, shedding 7.34% from its historic high of 85,836.12 posted on Sept. 26 and erasing most of an over 9% gain in the first half of 2024.

The Sensex's rapid fall was driven by hefty selloffs by foreign investors who flocked to China, betting on a recovery of the world’s No. 2 economy following Beijing’s pledges of significant stimulus measures in September.

In October alone, overseas investors dumped $11.8 billion worth of Indian stocks.

This has led to dips in Korea’s exchange-traded funds (ETFs) that track Indian equities. The Samsung KODEX India Nifty50 and the Mirae Asset Tiger India Nifty50 lost 0.46% and 0.36%, respectively, over the past month.

BUYING THE DIPS 

But Korean retail investors saw the falls as opportunities to buy the dips, and net-purchased 8.1 billion won ($5.8 million) worth of the Samsung KODEX India Nifty50 ETF and 11.5 billion won worth of the Mirae Asset Tiger India Nifty50 ETF over the same period.

Korean investors’ bold bets on Indian equities have been driven by market expectations of a strong rebound in the Indian stock market following Trump’s victory in the US presidential election.

Considering that President-elect Trump has threatened to slap 60% tariffs on Chinese imports, trade tensions between the US and China could escalate to a new level, which could cause an exodus of multinational companies from the world’s second-largest economy and their rush to find new manufacturing bases in India, market analysts said. 

“India is expected to enjoy great geopolitical benefits from Trump’s victory,” said Lee Jun-jae, a portfolio manager at Samsung Asset Management Co. “India’s importance in the global supply chain as an alternative to China will rise further.”

INDIA, RISING GIANT IN THE GLOBAL SUPPLY CHAIN

To unlock the opportunities, the Indian government has been upping the ante to woo foreign companies fleeing China.

Prime Minister Narendra Modi's administration has earmarked an all-time high of 11 trillion rupees ($130.4 billion) for the country’s infrastructure investment and lowered the country's corporate tax rates for foreign companies by 5 percentage points.

“The Indian government has not yet used 8.5 trillion of the 11 trillion rupees,” said Hyun Dong-sik, head of the overseas business division at Korea Investment Management Co. “Because the (Indian) government’s incentive budget is on a steady growth, the country’s economy is set to continue growing on stimulus measures in the second half.”

In anticipation of further growth of the Indian economy, Korean asset managers have rushed to launch new financial products that invest in Indian securities.

In May, Samsung Asset Management listed the Samsung KODEX India Tata Group ETF, with Tata Group’s companies as underlying assets.

The same month, Mirae Asset Global Investments Co. rolled out the Mirae Asset Tiger Indian Billion Consumer ETF, composed of India’s top 20 consumer brands.

Considering that India is one of the youngest emerging markets with a median age of 29.5, the country's economy is expected to enjoy an increase in domestic consumption driven by higher wages.

In September, Korea Investment Management Co. debuted two active Indian ETFs – ACE India Consumer Power Active and ACE India Market Representative BIG5 Group Active – that focus on growth sectors in India.

Write to Hyun-Ju Yang and Man-Su Choe at hjyang@hankyung.com
Sookyung Seo edited this article.