Why China’s Bad News is Going to be a Good News for India?

Will Nifty touch 20,000 Soon?

Introduction:

After two days of sharp correction, benchmark indices witnessed a sharp pullback rally while the Nifty 50 Index rose by around 0.95% and closed at 17,562 levels. Similarly, the BSE Sensex index rose by around 500 plus points i.e., 0.88%, and closed above 59,000 levels at 59,005.27.

Current Issue:

• The ongoing issue in the Chinese market, where there is a possibility of default of payment by China’s Evergrande which is due on Wednesday worth $83 million. But it had an immediate impact on Indian as well as other markets.
• The Sensex and Nifty Index of the Indian Stock Market fell by around 1%, while the other developed markets fall by around 2%.

o Negative Sentiment has been developed against China due to the origin land of Covid-19 Pandemic. Due to this, the Investors are working on a China plus one strategy, wherein they want to reduce their total dependency on China. Hence, in this China plus One Strategy, India seems to fit in the position very well.
o Recently, the Chinese Government has imposed some regulatory norms on Tech Start-Ups which are having huge data of the Young Population and Consumption pattern of China.

• Due to the above-discussed reasons, the incremental capital is following India. This could be in 2 manners i.e., short-term and long-term.
• In the short term, the capital could inflow from the Foreign Portfolio Investors and Foreign Institutional Investors (FIIs), which has an immediate impact on the stock market And this could be one of the reasons for the market reaching new highs of 20,000 level.
• In the long-term, the capital comes in the form of Foreign Direct Investments (FDI). This capital comes in with a proper commitment of time. Herein the Government is highly interested.

Conclusion:

These capital inflows in the form of FDIs and from FPIs and FIIs for the shorter-time period or the longer-time period will surely benefit the emerging economies wherein India seems to be in the first positions. Do follow your due diligence before making any investment decisions or do consult a financial advisor before making one.