In my first two articles for this column, Global India Insights, I discussed a global reset—how global investments are moving out of the United States due to Trump’s unpredictability—and how India could attract an incremental ~US$200 billion as a result.
In the next two articles, I will place that US$200 billion in the context of what foreign investors have already invested in India and the potential that remains untapped.
Foreign investments are important for India. However, in a global context, they represent a minuscule portion of institutional investors’ overall portfolios.
When I refer to global investments, I mean those made by large institutional investors: Pension Funds, Sovereign Wealth Funds (SWFs), Insurance Companies, Endowment Funds and Foundations, Asset Management Companies, Investment Advisors, Private Banks, and Wealth Managers. Except for SWFs, the capital for these investors originates from individuals—both retail and high-net-worth.
I estimate the total assets under management (AuM) of these institutional investors to be approximately US$300 trillion. (See the table below for details and breakdown.)
To give you a sense of scale: global annual GDP is around US$105 trillion, while India’s annual GDP is about US$4 trillion.
Now, can you guess what fraction of the US$300 trillion is invested in India—without scrolling down? Take a guess, and then read on to see how your estimate compares with the actual and potential investment landscape in India.
These global institutional investors allocate capital across asset classes and geographies. However, many are constrained by regulations or internal risk limits that favor domestic investments.
I estimate that one-third of the total AuM—about US$100 trillion—is available for international investment, outside of the investors’ home countries.
For most investor categories (except SWFs), the majority of this capital originates from OECD (developed) countries. This is simply a reflection of income and wealth distribution in the developed world.
SWFs, on the other hand, derive their capital from national resources—typically commodities like oil—which are exported, with a portion of the proceeds set aside for investment and diversification.
A significant portion of these assets is allocated to conventional, publicly listed asset classes such as equities and fixed income. There is also a growing allocation to alternative assets like private equity, infrastructure, commodities, and real estate.
Once investors decide on their asset class allocations, they determine how much to invest outside their home countries, based on regulations and internal guidelines.
In fixed income, a large share is typically allocated to domestic government and corporate bonds. In public equities, the usual pattern is a heavy allocation to domestic markets, followed by developed global markets, and a smaller allocation to emerging markets.
Think of this as a triangle representing asset class allocation. For each class, investors decide how much to allocate domestically, globally, and to emerging markets—based on expected returns and perceived risks.
As you might guess, allocations to emerging markets are often absent or minimal. While investors expect higher returns from emerging markets due to faster growth, concerns about market volatility, geopolitics, governance, liquidity, and sentiment often limit exposure.
India, being an emerging market, is typically underrepresented in global portfolios. Most global investors either have no allocation to India or only a small one through broader emerging market funds. Only a few have dedicated India investments.
As of December 2024, foreign investments in Indian public equities were estimated at US$842 billion. Assuming one-third of the global AuM (US$100 trillion) is investable internationally, India accounts for less than 1% of that.
What was your guess?
Foreign Investors have less than 1% of Investable AuM in Indian public equities
India represents ~4% of global GDP and ~4% of global stock market capitalization. Yet, foreign investors have allocated less than 1% to India’s public markets. Including private equity, venture capital, real estate, and infrastructure, I estimate total foreign investment in India to be around 2%.
This under-allocation persists despite India’s public equities being among the best-performing asset classes over time.
Of the ~US$842 billion invested, I estimate less than US$200 billion is through dedicated India strategies. The rest is part of broader emerging market allocations where India has a significant weight.
Another key point: the bulk of India allocations come from investment advisors and asset managers. Traditional asset owners—SWFs, pension funds, insurance companies—have minimal exposure to India, and even less through dedicated strategies.
That’s why I’ve long argued that foreign investors are missing out on India’s growth and returns.
I advise clients to allocate at least 5% of their global investable portfolios to India—based on GDP weighting. That would imply US$5 trillion in foreign investments (5% of US$100 trillion). We’re far from that mark. The US$200 billion I mentioned earlier as a potential inflow from a U.S. reset is small compared to the broader opportunity.
Stay tuned for my next piece, where I’ll dive deeper into foreign investments in India and ask whether investors are truly “rolling the dice” on India.
Disclaimer
Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Arvind Chari is the Chief Investment Strategist at Q India UK, Ltd, an affiliate of Quantum Advisors Pvt Ltd. Arvind has over 20 years of experience in long-term India investing across asset classes. Arvind is a thought leader and guides global investors on their India allocation.
The views and opinions expressed in this article are his personal views.
You can follow Arvind on LinkedIN: https://www.linkedin.com/in/arvind-chari-879200aa/
His X handle is : @arrychary
