India's Tech Stock Trounce China Peers, Widening Gap By CIOTechOutlook Team

India's Tech Stock Trounce China Peers, Widening Gap

CIOTechOutlook Team | Wednesday, 28 June 2023, 06:16 IST

This year, India's consumer technology stocks have outperformed their larger Chinese competitors handily, expanding the gap between the two largest equities markets in the world.

Due to the firms' emphasis on profitability and a booming economy, an equal-weighted bespoke index of India's five leading Internet equities, including Zomato Ltd. and Paytm parent One 97 Communications Ltd., has increased more than 20% in 2023. That contrasts with the underwhelming performance of China's tech behemoths, whose stock values remain stuck below their highs from January.

India's superior performance reveals a wider trend as international money managers search for opportunities outside of China. Given the country's growth potential and positive relations with the West, Indian businesses are attracting investors despite being swamped in terms of market size and revenue. That's because of geopolitical and regulatory issues, while Chinese growth stocks lag behind the global tech boom.

“Investors are turning to India as it remains one of the best consumption stories in Asia,” according to Rajat Agarwal, Asia equity strategist at Societe Generale SA. India is still an under-penetrated market for digital tech and “there is definitely a long runway of growth ahead,” Agarwal said.

Following a dismal 2022, when the Federal Reserve's tightening and concerns about a global recession rocked the still-emerging sector, India's consumer tech equities are now rebounding. One 97 Communications has increased by almost 60% in 2023 as a result of the renewed emphasis on profitability. Zomato, a food delivery service, is up 26%.

With the reopening boom stalling and tensions with the US still at an all-time high, investors in China see little cause for optimism. Through Monday, a Hang Seng index of China's IT stocks was down 6.2%, while JD.com Inc. and Meituan had each lost at least a fifth of their market value.