Surging India internet stocks trounce China rivals

India's consumer technology stocks are on a tear this year, handsomely beating their larger rivals in China and widening the divergence between two of the world's largest equity markets.

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An equal-weighted custom index of India's five flagship Internet stocks including Paytm parent One 97 Communications Ltd. and Zomato Ltd. has risen more than 20% in 2023, bolstered by the firms' focus on profitability and a buzzing economy. That compares with a lackluster performance among China's tech behemoths, whose share prices are languishing below their January highs.

India's out performance high-lights a broader shift as global money managers look for opportunities outside China. While dwarfed in terms of market cap and revenue, Indian companies are luring investors given the the nation’s growth potential and favorable ties with the West. That’s as Chinese growth stocks lag a global tech boom amid geopolitical and regulatory risks.