India’s ability to turn economic expansion into corporate profits makes it a better prospect for investors than Japan or China, the latest Bloomberg Markets Pulse survey shows.

A strong rebound in Indian and Japanese stocks as Chinese markets tumble has reshaped Asia’s financial market landscape, giving global investors three competing pillars of regional allocation.

Despite China’s extremely low stock valuations and Japan’s progress in improving corporate governance, nearly half of the 390 MLIV Pulse survey respondents still selected India as the best investment among Asia’s top three. The survey is a vote of confidence in Indian companies as the world’s largest democracy heads towards general elections, which will be held in seven phases from April 19 to June 1.

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Kieran Calder, head of Asia equity research at Union Bancaire Privee in Singapore, said: “People prefer expensive Indian stocks, such as those that are better at converting GDP growth into earnings growth, than cheap Chinese stocks. . ” He said the outlook for Indian equities was further supported by “a strong track record of sustained earnings growth and a favorable geopolitical environment.”

The main stock indexes in India and Japan have climbed to record highs this year, driven by rapid economic growth in India, a gradual return to inflation and corporate reforms in Japan. Indian stocks currently trade at about 23 times next year’s expected earnings, beating even the United States and beating Japan’s 17 times and China’s, according to data compiled by Bloomberg based on MSCI Inc. indexes. About 9 times.

Key indicators of China’s stock market are down about 40% from their peak three years ago as deflation and a spreading housing crisis weigh on the economy. More than half of respondents said they expected China’s stock market to underperform India and Japan over the next 12 months.

Indian stocks attracted $25 billion in net inflows in the year to March, compared with just $5.3 billion in China, according to data compiled by Bloomberg. The drivers behind India’s stock market include population growth and optimism that a growing middle class will lead to higher corporate profits.

“India is the best market to own,” said Vikas Pershad, portfolio manager at M&G Investments in Singapore. Indian stocks could play an important role in regional benchmarks, he said.

Indian stocks currently account for 18% of the MSCI Emerging Markets Index. China’s 25% weighting is well below the high of more than 40% a few years ago.

41% of respondents cited India’s infrastructure as a particular highlight in the survey. Prime Minister Narendra Modi’s government has more than tripled infrastructure allocations in fiscal 2025 from five years ago to more than 1.1 trillion rupees ($132 billion). Prime Minister Narendra Modi is expected to invest Rs 1.43 trillion over six years to 2030 to modernize critical infrastructure.

Larsen & Toubro Ltd., India’s leading infrastructure and capital goods company, trades at about 30 times earnings. Meanwhile, other companies such as PNC Infratech Ltd. and JSW Infrastructure Ltd. are still trading at or below their 10-year average valuations.

The South Asian country is also quickly becoming an alternative to China for global manufacturing as companies such as Apple Inc. ramp up production facilities in the country.

Prime Minister Narendra Modi, whose party faces national elections this year, has made accelerating India’s economy a key plank of his campaign. He is expected to return as prime minister with an absolute majority to deepen infrastructure investment and manufacturing. If he loses, infrastructure and manufacturing development could be derailed. Still, investors appear unfazed, with more than four-fifths of respondents saying the election would have a negligible impact on markets or that they were not concerned.

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Japanese value stocks, which are typically larger, stronger companies that trade relatively cheaply, were also considered an attractive investment by more than a third of respondents.

One of the main reasons for the rise in Japanese stocks is corporate reforms introduced by the Tokyo Stock Exchange.

“Japanese companies are taking the TSE’s requirements seriously,” said Fumie Kikuchi, a research analyst at GMO in Singapore. “Now that corporate management and investors are speaking the same language, it means a lot.”

Meanwhile, in China, slowing economic growth, deflation and the ongoing real estate crisis may make investors Intimidated. .

“There is little incentive to allocate money to China,” he said. “We’re still in a deflationary environment and as long as we don’t appear to have an upward trend – which will create more revenue growth – then there’s very little appeal.”

The MLIV Pulse survey was conducted by Bloomberg’s Markets Live team, which also operates the MLIV blog, on terminals and online among Bloomberg News readers April 8-12. This week’s survey focuses on quarterly earnings. Will Nvidia’s earnings make you increase your investment in big tech companies? Share your views here.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)