Indian equities have of late come under pressure amid waning domestic consumption, raising questions over the outlook for local shares after a nine-year rally.Global investors are deserting India’s stock market, selling shares at a record pace to buy Chinese stocks instead, in a dramatic reversal of fortunes for the Asian giants over the last six months.A hit to earnings from high inflation and interest rates have chipped 13% off Indian stocks from September’s record high, while China’s promise of stimulative policies lures investor interest.“When China gets flows, India doesn’t,” said Jitania Kandhari, deputy chief investment officer of the solutions and multi-asset group at Morgan Stanley Investment Management.Foreigners have pulled nearly $29bn out of Indian stocks since October, the most in any six-month period, as they turn their backs on a market most investors had embraced for a couple of years.That money has fled to China, where Hong Kong’s benchmark Hang Seng Index, home to many major Chinese companies, is up 36% since late September, drawn by bets on artificial intelligence spurred by Chinese startup DeepSeek.Global fund managers are in no rush to load up on Indian stocks even after an unprecedented losing streak has lowered equity valuations.That’s because the market is still grappling with challenges posed by an economic slowdown, profit downgrades and potential US tariffs. Traders looking for bargains within Asia are gravitating toward still-cheap Chinese equities, which are in the middle of a bull run.Overseas investors have pulled almost $15bn from Indian shares so far this year, putting outflows on track to surpass the record $17bn registered in 2022, according to a Bloomberg report. The selloff has wiped out $1.3tn from India’s market value.For the first time in two years, China has a larger weight than India in the portfolio of Britain’s Aubrey Capital Management, which focuses on consumer companies.While asset managers such as Morgan Stanley and Fidelity International remain overweight on India, they have trimmed exposure over the last few months to add to bets in China.China’s stock market has proved an unlikely sanctuary from the trade war unleashed by US President Donald Trump, as it is relatively cheap and seen poised on the cusp of an economic recovery.Before the steep selloff in Indian stocks over the past six months, investors had scrambling to keep up with the strong performance that carried its valuation to eye-watering levels.But slowing corporate earnings and an economy seen growing in the current financial year at the slowest pace in four have hurt sentiment, investors say.India’s benchmark NSE Nifty 50 Index is trading at 18 times forward earnings, compared with 21 times in September. But despite the drop, the market’s multiple remains higher than that of all its emerging Asian peers.Latest government figures show India’s economy will expand at a four-year low of 6.5% in the current fiscal year. Some analysts expect growth in the coming years to remain well below the nearly 9% average seen in the past three years.Corporate profits have also taken a hit in this environment.More than 60% of companies comprising the Nifty 50 Index saw downgrades to their forward profit estimates last month, according to JM Financial Ltd.To be sure, not everyone is giving up on India.“India has one of the best economic backdrops of the major markets, with plenty of economic drivers as well as stock market support,” according to Ryan Dimas, portfolio specialist for William Blair’s global equity strategies.Yet, Morgan Stanley’s Kandhari reckons that the “inflection point” at which foreign money stops leaving Indian stocks is likely only in the second half of 2025.