Indian stock market hits record 10-day losing streak, foreign capital shifting towards China in Asian investments.

According to global trading platform statistics and institutional compilation data, the sell-off wave in the Indian stock market has reached another serious milestone, with the benchmark index setting a record of continuous 10-day decline amid continued selling by overseas investors. At the same time, the huge foreign institutional funds profit-taking from the Indian stock market are flowing into the Chinese stock market (Hong Kong and A shares), shaking Silicon Valley and Wall Street since DeepSeek's announcement and Alibaba's stunning performance and AI ambitions, a large amount of foreign capital is repositioning in Chinese assets, especially Chinese tech stocks, betting that Chinese tech giants will be the core beneficiaries of the global AI boom. On Tuesday, one of the benchmark stock indices in the Indian stock market - the NSE Nifty 50 index plunged by as much as 0.7%, reaching its lowest level in nine months, and widening its drop since the historical peak in September by 16%. Global external funds have been the main force behind this wave of selling in the Indian stock market, withdrawing nearly $14 billion this year, mainly due to concerns about a significant slowdown in economic growth, as well as the recent performance of large Indian companies showing valuation levels at historical highs that are severely mismatched with the actual performance of Indian companies. Since 2024, the rising frenzy of the Indian stock market, which has repeatedly set new highs, has also been dominated by foreign funds, but after reaching a historical peak in September 2024, it has plummeted all the way. The extremely high valuations, performance far below analysts' expectations, and the failure of the Indian economy to meet the optimistic expectations of foreign investors have all exacerbated the sell-off wave, while the attractiveness of the Chinese stock market in terms of valuation has continuously attracted the funds fleeing from the Indian stock market. DeepSeek's leadership in the Chinese tech stock frenzy has further intensified the outflow of funds from the Indian stock market. It is noteworthy that the large amount of foreign funds exiting the Indian stock market have mostly surged into Hong Kong stocks, not only because of the extremely strong AI investment logic of the so-called "Ten Chinese Tech Giants", but also because Hong Kong stocks serve as a gateway for foreign investment in the Chinese market, making them the best entry point for external funds such as hedge funds to invest in Chinese companies. After DeepSeek ignited the Chinese AI investment frenzy, foreign funds flocked to Hong Kong stocks. "Investors are feeling uneasy," said Daljit Singh Kohli, stock director at Roha Asset Management. "Although most negative factors or bearish trends have been priced in and digested, market sentiment is still being shaken and has not yet substantially recovered." Considered the favorite investment market among most emerging market fund managers last September, the rapid change in sentiment among investment institutions towards the Indian stock market is remarkable. The massive rebound in the Chinese stock market led by DeepSeek and the recovery of the US dollar exchange rate have further diminished the attractiveness of Indian assets. When Goldman Sachs recently raised its outlook for the Chinese stock market, it stated that the latest technological breakthroughs in the Chinese market are fundamentally more micro-level and driven more by research capabilities and innovation, which may be more durable than a market recovery purely driven by policies. The continued sell-off in the Indian stock market has begun to affect individual investors in India, who have shown resilience and a "buy on dips" enthusiasm during the market declines post-pandemic. According to exchange statistics, their share of cash stocks on the National Stock Exchange of India in January touched its lowest point in nine months. Nevertheless, recent government measures to boost consumption and efforts to avoid tariffs and negotiate a bilateral trade agreement with the United States are expected to support an oversold rebound in the Indian stock market. In addition, oversold technical indicators and a decrease in trader hedging demand indicate a possible very short-term rebound in the Indian stock market. The high valuation of the Indian stock market offers no value proposition compared to Hong Kong and A shares Undoubtedly, in terms of valuation, the valuation premium of the Indian stock market is significantly higher than that of the recently rebounded Hong Kong and A share markets, which is the core logic for external funds such as hedge funds to favor the Chinese stock market over the Indian stock market in recent times. In addition to the valuation advantage, they are more unable to resist the Chinese tech giants that offer both fundamental and valuation advantages under the AI frenzy, such as Alibaba, Tencent, and BYD Company Limited. When Alibaba and Tencent present labels such as "cutting-edge AI large models + powerful cloud AI computing system + complete AI application software development platform", and these labels scale as AI application software penetrates various industries in China, the future market size is expected to rival that of Amazon AWS and Microsoft, which may trigger a similar investment frenzy towards Chinese cloud computing giants as seen between 2023 and 2024 in North America. With the rise of local Chinese AI startups like DeepSeek, and the introduction of a new "AI large model computing paradigm" with core principles of "low cost" and "high energy efficiency", DeepSeek is beginning to bring about AI innovation products/services that deeply integrate into various industries such as healthcare, finance, and education, as well as consumer electronics and other AI application terminals, which are expected to drive sales and operating profits in China's semiconductor, SaaS software, cloud computing, and all other industries into a new growth paradigm. The Indian stock market enjoys a high premium among its emerging market peers From a valuation perspective, the weak profitability of Indian companies and a relatively high valuation premium compared to emerging market peers, such as the Chinese stock market, still make the Indian market less favored by global fund managers. According to statistics compiled by Bloomberg Intelligence, the MSCI India benchmark currently shows the weakest upward revision trend in earnings among major emerging markets in Asia. DeepSeek ignites the frenzy of Chinese tech stocks, which may lead the Chinese stock market into a "long bull" trend DeepSeek's groundbreaking and revolutionary "ultra-low-cost AI large model" has become a catalyst for global investors to reassess Chinese assets, especially in evaluating the Chinese stock market (including Hong Kong and A shares), a driver of a never-before-seen "bull market", and these investors, who were already concerned about the high valuations of US tech stocks and the Indian stock market. DeepSeek's sudden emergence has thoroughly ignited global funds - including leveraged hedge funds and traditional asset management giants, around the Chinese AI field. .With the investment frenzy, the booming market for Chinese technology stocks is expected to drive both the Hong Kong and A-share markets into a long-term bull market together.Especially under the dominance of the "Top 10 Tech Giants" in China, a large amount of foreign funds are flowing from the Indian stock market, where valuations are at historic highs and company profits are far below analyst expectations, to the Chinese stock market. Goldman Sachs predicts that as global funds continue to increase their allocation to the Chinese stock market under the dominance of the "Top 10 Tech Giants," the Hong Kong stock market may continue to be favored globally. The "Top 10 Tech Giants" (Terrific 10) include Alibaba, Tencent, Meituan, Xiaomi, BYD Company Limited, JD.com, NetEase, Baidu, Geely, and Semiconductor Manufacturing International Corporation. Since February, driven by the frenzy of large-scale deployment of domestic AI models brought about by DeepSeek, it is widely believed that these top ten Chinese giants will be the core beneficiaries of the global AI boom, driving share prices far exceeding expectations since February and leading the US stock market into a long-term bull market with the "Big Seven" since 2023 - Apple, Microsoft, Google, Tesla, Nvidia, Amazon, and Meta Platforms, which are the core driving forces behind the S&P 500 index and Nasdaq repeatedly reaching new highs. Jeff Weniger, Head of Stock Strategy at WisdomTree Asset Management, bluntly stated in a tweet that the "Big Seven" in the US stock market are giving way to the Chinese "Top Ten". Since the emergence of DeepSeek-R1, which combines the labels of "low cost" and "high efficiency," there has been a fundamental change in the logic of the "Big Seven" led by tech companies such as Nvidia, Microsoft, and Google propelling the US stock market. Investors have begun to strongly question whether the AI cash-burning plans of US tech giants are rational. Apart from Meta, the performance of other giants' stock prices has significantly lagged behind the S&P 500 index, becoming the core negative catalyst dragging down the entire US stock market. Comparing the performance of the Chinese "Top Seven" - Tencent, Alibaba, Xiaomi, BYD Company Limited, Semiconductor Manufacturing International Corporation, JD.com, and NetEase, with the US "Big Seven," the Chinese giants with strong earnings growth are much cheaper on a valuation basis. A research report released by Natixis Bank shows that following regulatory tightening in the internet industry, the valuation of the Chinese "Top Seven" has almost halved, with forward P/E ratios fluctuating narrowly between 14x-20x. Despite recent price rebounds, this combination has not yet reached the upper limit of the past three years and remains about 10% lower than the average level of the past five years. The valuation premium of the Chinese "Top Seven" has decreased from approximately 115% before 2021 to about 55% currently. This is about 20 percentage points lower than the average premium over the past five years. Compared to the US "Big Seven," there is a greater degree of valuation discount, currently at approximately 45%.