China, India Illustration: Xia Qing/GT

India-based funds are turning their attention to Chinese assets, and talk of investing in China is "more than at any point since 2020," the Global Times learned from senior Indian market players.

Asked how the Indian investment community is discussing China, Manish Bhandari, founder and portfolio manager of Mumbai-based boutique portfolio management service provider Vallum Capital Advisors, told the Global Times that some fund managers are "curious" but they are constrained by regulatory measures.

Vallum's multi-asset book already holds Chinese equities through funds available in India, and "we were lucky enough to get that allocation on at the right time," he said. Those China bets, together with the rest of the global book, are what he credits for the strategy's recent double-digit return.

Amid the global artificial intelligence (AI) boom, which has boosted the appetite for Chinese stocks ranging from chips and cloud computing to servers and robotics, Vallum Capital Advisors is among the Indian managers that have built a China sleeve into their books on the view that those Chinese assets are still "undervalued." 

Data from the Reserve Bank of India showed that Indian mutual funds' holdings of Chinese mainland equities were up 52.2 percent year-on-year to 8.22 billion rupees ($86.15 million) as of the end of March, Indian financial website ET Now reported. At that point, Chinese equities were the sixth-largest category of foreign equity holdings of Indian mutual funds by value.

Some Indian mutual funds whose portfolios are heavily tied to Chinese equities have reported high returns and strong risk-adjusted performance over the past year. According to Indian media reports, as of June 25, the one-year return of Axis Greater China Equity FoF (fund of funds) stood at 41.43 percent, while that of Edelweiss Greater China Equity Offshore Fund was also quite high at 51.34 percent. 

Bhandari said that the emerging AI wave has cast China and India, two of the largest economies in Asia, as potential collaborators rather than rivals. 

"China leads the frontier-model race for now. DeepSeek, Qwen and Kimi are some of the widely known open-source models that have beaten some Western frontier systems. An open-weight model hands away the hardest part, and what's left is fine-tuning, compliance-wrapping, and integrating it into a client's actual infrastructure, which is exactly the muscle Indian information technology services and global capacity centers have built across every prior enterprise wave," Bhandari noted.

Mahendra Swarup, founder of VG Capital and former president of the Indian Venture and Alternate Capital Association, told the Global Times that there's considerable scope for AI cooperation between China and India. 

He said that India's strengths lie in software development, engineering talent, digital public infrastructure and entrepreneurial innovation. China has developed significant capabilities in AI applications, hardware, manufacturing and large-scale deployment. "These capabilities are complementary in many respects," Swarup said.

Bhandari expressed hope for a stable and predictable relationship between China and India, which he said would unlock more capital flows and create rising bilateral investment opportunities.

Amid more positive momentum in bilateral relations, Indian industry insiders also took note of rising opportunities for entrepreneurs from the two countries to engage in practical cooperation. 

"If the recent improvement in bilateral relations leads to greater regulatory clarity and business confidence, Chinese investors will once again evaluate opportunities in India, although the general sentiment is one of cautious optimism," Swarup said.