As global investors begin rethinking their overwhelming reliance on U.S. equities, two markets are emerging as the top destinations for future capital flows: India and Japan, according to a recent note from Nomura analysts.
The shift comes amid growing uncertainty around U.S. economic exceptionalism, a narrative that has driven nearly $3.3 trillion in foreign inflows into American equities since 2010. Today, foreign investors hold roughly 17.8% of the U.S. equity market, amounting to $16.5 trillion — a concentration Nomura believes may no longer be sustainable.
“If this narrative is really changing, financial flows could shift substantially,” said the firm’s Global Head of Macro Research.
India and Japan Lead in Global Reallocation Framework
Nomura evaluated 46 non-U.S. developed and emerging markets using 24 metrics grouped into five key pillars:
Market liquidity and efficiency
Economic and financial fundamentals
Governance and regulation
Risk and stability
Role in the global economy
Based on this framework, India ranked highest among emerging markets, while Japan led among developed markets. Both countries offer a rare combination of market depth (liquidity) and breadth (diverse investment opportunities), making them prime candidates to absorb capital reallocations.
Investors assessing these opportunities often use comparative metrics. Platforms like Ratios (TTM) help measure valuation efficiency, while country-level macro indicators from the Economics Calendar provide key context on inflation, interest rates, and growth.
China: High Score, High Risk
Interestingly, China technically topped Nomura’s model, but the analysts issued a clear warning: geopolitical risk and a lack of transparency make the country a high-risk bet.
“If — and this is a big if — US-China relations improve meaningfully, China could experience unprecedented capital inflows,” the note said. Until then, India and Japan remain the safer long-term plays.
With U.S. equity dominance potentially peaking, the spotlight is shifting to markets that combine governance, stability, and scale. And right now, Nomura believes India and Japan check all the right boxes.
