Japan’s Investment Pivot: India Poised for Surge in Portfolio Flows, Says Nippon Life CEO
The strategic partnership between India and Japan is entering a new, high-growth phase, with capital flows expected to move beyond traditional Foreign Direct Investment (FDI) into the broader financial markets. According to Sandeep Sikka, MD & CEO of Nippon Life India Asset Management Company, the sentiment among Japanese investors has shifted from a tentative exploration of the Indian market to a committed “make-in-India for the world” approach.
Sikka, who was recently re-elected president of the Association of Mutual Funds in India (AMFI), participated in a high-level, 200-member business delegation led by Union Minister for Commerce and Industry Piyush Goyal during a recent diplomatic visit to Japan.
Shifting the Narrative: From FDI to Portfolio Flows
Sikka observes that the discourse within Japanese corporate boardrooms has undergone a fundamental transformation. “The conversation has now shifted from ‘why invest in India’ to ‘how much more to invest,'” Sikka noted. He emphasizes that the synergy between the two nations is complementary: India provides the scale, talent, and growth trajectory, while Japan brings essential capital and advanced technology.
A critical indicator of this shift is the expected influx of Japanese household savings. Japan boasts a staggering $14 trillion savings pool, half of which currently sits in low-yielding bank accounts. Of the $2.2 trillion managed by Japanese asset managers, approximately $800 billion is invested overseas—yet India currently captures only about 1% of that allocation.
“After FDI, we are going to see more Japanese portfolio flows,” Sikka stated. He pointed to the Japanese government’s NISA (Nippon Individual Savings Account) initiative as a catalyst, which encourages individual overseas investment and has already prompted Nippon to launch specific schemes to capture this emerging interest. Data supports this optimism, with India-focused funds in Japan climbing from $6.7 billion in 2016 to an estimated $19.6 billion by 2026.
Addressing Stability and Policy Maturity
For Japanese investors, long-term stability is paramount. Addressing historical concerns regarding policy predictability and profit repatriation, Sikka remains firm. “We have been in India for a long time… and from our point of view, the repatriation of dividends has been smooth,” he said. He further highlighted that India’s current political and policy environment offers a degree of certainty that resonates well with the Japanese, who have witnessed frequent changes in their own leadership in recent years.
Domestic Resilience and Market Outlook
While global geopolitical tensions—particularly in West Asia—have previously created jitters, Sikka argues that India’s domestic market remains remarkably resilient. He believes the “worst is over” regarding external pressures like volatile crude prices. With the stabilization of the rupee and renewed FPI inflows, the macro-outlook is steadying.
Domestically, the Indian mutual fund investor has matured. “New investors are entering, SIP (Systematic Investment Plan) numbers are growing, and gross inflows remain positive,” Sikka observed. He noted that investors are now effectively balancing their strategies, opting for lumpsum investments during market dips while maintaining SIPs for consistent wealth creation.
On the regulatory front, Sikka welcomed the move toward Centralized Automated Systems (CAS), describing it as a necessary step for industry transparency. While acknowledging that structural changes require a period of adjustment, he believes these moves will eventually improve price discovery and reduce tracking errors, ultimately benefiting the end investor.
