India’s potential to attract Japanese investments has gone up significantly thanks to policy continuity over the tenure of the Narendra Modi-led governments, the country’s economic strength and sustained growth in domestic consumption, said the British banker who has helped Nomura, Japan’s largest brokerage, turn around its financial health by ending three straight years of declining profits.
Historically, along with US, India has been one of the best performing equity markets over any time period and also one of the most stable large economies in the past decade, tempting businesses to swing more towards India and take advantage of global supply chain disruption, compared to several ASEAN peers. Even for Nomura, India will be a key growth market where it wants to deploy more capital to help sustain 8-10 per cent return on its equity.
In business conversations across Japanese boardrooms that we are having, India is very high up on the list of things that people are excited about, said Christopher Willcox, Head of Nomura wholesale division that includes trading, investment banking.
“Several of them have already stated India is and will be an important focus for them over the next few years,” added Willcox, who recently hit the headlines for his record pay package, tripling his own CEO’s compensation and ever surpassing that of Deutsche Bank’s AG’s CEO Christian Sewing.
The checkered experience of several Japanese multinationals such as Daichi Sankyo, NTT Docomo, Softbank, Ricoh dealing with warring Indian counter parties or business founders have always been a bone of contention which has resulted in fluctuating FDI flows from the country, one of India’s closest long-term economic ally in the region, before a spurt in 2023. Even the overall share of Japanese investments has tapered compared to historic highs of the Shinzo Abe era coinciding with a sharp 62.17% decline in net foreign direct investment (FDI) flows into India in FY24 — the lowest since 2007 — from the previous year.
But Wilcox, 56, argues the prevailing business friendly under current have by and large derisked the India story amongst Japan Inc. “People view India as a lot less tumultuous place to do business than before.”
In the past, Japanese corporations have been far more active to geographically diversify into other parts of the continent, mainly China or the Tiger economies of South East and North Asia. That has been changing as companies have started to look beyond China for supply chain diversifications. “India will be among the top-most alternatives. But you cannot upend a 20-year trend and switch overnight,” said Willcox.
Optimistic about the resilience of the Indian and Japanese economies and financial markets, Willcox is unperturbed by the over $13 billion pullout by global investors from Indian equity markets so far this quarter. “I probably have a slightly less cataclysmic view of some of the headline narratives of today – Trump led trade wars, inflation, interest rate volatility.” While admitting that incumbent governments around the world are finding it difficult to thwart waves of opposition, he firmly believes markets like US, Japan or India are some of the “positive stories” worldwide that have seen structural changes, secular growth, long periods of low inflation and genuine reforms in corporate governance. “China too is looking healthier than what it did three months before. With the latest stimulus package, they have made a start.”
He considers the current correction in Indian equities — the two domestic indices have fallen 10% since end September – led by subdued corporate earnings more of a transitory, cyclical slowdown largely on account of “external uncertainties.”
Post China’s recent stimulus, he believes if any investor wants to redeploy capital, “India remains one of the most liquid markets for them to take some money off the table in the short run. But if you believe the equity markets is a reflective sort of measure of the economy and more importantly, cash flows of India domiciled companies, then most of the factors that investors look at are positive.”
Some asset managers, he also believes are liquidating their global portfolios which includes India to reinvest into India specific funds. These technical readjustments are also causing temporary choppiness.
Willcox is equally impressed with the depth and evolution of the Indian equity markets that recently overtook the Hong Kong index in market capitalisation. “A lot of private capital entered India but had difficulties exiting. In the last few years, we are seeing a spurt in monetising events of these long standing investments through IPOs.”
CHANGE OF GUARD
The incoming Trump administration’s stated position of accelerated oil and gas production could also turn out to be a boon for an energy guzzlers like India and China that are heavily import dependent. “If there was a threat that you would worry about the India story, it is high energy prices. But it doesn’t look like it’s going to be immediate problem if the new President pushes for the election promise of ‘Drill Baby Drill.’ ” Even OPEC, he highlights, is over producing, unable to hold on to their targets easily.
Even as Asian businesses brace themselves for big hikes in American tariffs, Wilcox, a former JP Morgan and Citi banker for over 25 years believes there’s more subtle nuances underneath the election rhetorics. “A big part of Trump’s trade narrative is about reshoring,” he points out. “If you subtract what is being generated by US firms who happen to be manufacturing overseas and importing back to their home market from the total US trade deficit figure, you get a slightly different story.” He is of the view that what the Trump administration wants to target is not necessarily tariffs at the expense of other countries, but is “actually a negotiation about the relationship between the US worker and the corporates.”
Spurred by a significant revamp in cost and manpower and a corresponding rebound in in its wholesale business including fixed income trading, aided Nomura’s wholsesale division to revive its fortunes posting the best quarterly revenue numbers for Q2FY25 since in 2012-13, after a prolonged period of turmoil that got exacerbated by the US banking crisis of 2023 and the collapse of Credit Suisse. A surge in Japanese stock trading earlier this calendar year eclipsed the bubble peaks of 1980s. “In India, we’ve got a really solid banking franchise and that’s something that we want to continue to invest in.” Willcox’s special emphasis will be to bulk up the three key pillars – forex, fixed income and investment banking, by adding talent and technology. “We’ve got a really solid equities sales and broking business both on the investor side as well as the corporate side, but we’re looking to grow the corporate side, especially on FX bit by a little bit.”
Within investment banking, Nomura has been focusing on consumer retail, financial services, sustainability and energy transition themes, having acquired the boutique Greentech in 2020. “That will continue to remain a mega-theme even under Trump’s 2nd term in office.” The firm has been in the news for being a potential suitor for Avendus, the hottest deal shop out of India, but Willcox rules out a shopping spree of “small, dedicated or niche boutiques,” even though that single acquisition has had a good knock on effect onto the rest of the business. Most of the growth in Nomura’s IB franchise, he feels, will be organic. Without making any specific comment on the Avendus opportunity Willcox said, “the choices that we make about organic or inorganic growth for any of our business verticals will be thoughtful.”