India Becomes Asia’s Least-Preferred Stock Market
NEW DELHI: India has replaced Indonesia as the least-preferred stock market in Asia, according to the latest Bank of America (BofA) fund manager survey. The findings reflect growing caution among global investors towards Indian equities despite improving corporate earnings and a return of foreign inflows.
The survey of 98 fund managers overseeing $272 billion in assets, conducted between August 7 and 13, showed that 32 per cent of respondents were net underweight on Indian equities.
Key Concerns Driving the Bearish View
The primary concern cited by fund managers was the lack of clear exposure to the global artificial intelligence investment theme.
Weak economic growth ranked as the second-biggest worry, followed by high valuations and a perceived lack of reforms.
These factors have contributed to a cautious stance even as fundamentals show signs of strength. Earnings of Nifty 50 companies rose 18 per cent year-on-year in the latest quarter, ahead of Motilal Oswal Financial Services’ estimate of 10 per cent growth.
Global funds have also purchased more than $4 billion of Indian stocks in the current quarter, the highest among regional emerging markets after heavy outflows in the first half of the year.
Market Performance Under Pressure
Investor caution is reflected in market performance. The Nifty 50 has recovered 8 per cent from its March low but remains down 8 per cent for the year, making it the second-worst performing major market in Asia in 2026. The index is also on track to end a historic streak of 10 consecutive years of annual gains.
Rising energy prices have added to the uncertainty. India was previously ranked as the least-preferred market in the BofA survey in May, when the US-Iran conflict pushed crude oil prices higher. With no clear resolution to the conflict, energy costs are climbing again and weighing on sentiment.
Indonesia Gains Favour
Sentiment towards Indonesia improved in the latest survey. The proportion of fund managers who were net underweight on Indonesian equities fell to 27 per cent from 32 per cent in July.
The Jakarta Composite Index has gained more than 20 per cent from its June low, supported by central bank measures to stabilise the currency and reduced concerns about a potential MSCI frontier-market downgrade.
Taiwan and Japan continue to rank as the most preferred markets among the fund managers surveyed.
The survey highlights a disconnect between improving corporate fundamentals and investor preference.
While earnings are strengthening and foreign capital has begun to return, concerns over valuations, growth prospects, reforms and limited AI exposure continue to temper enthusiasm for Indian equities.
Analysts note that this tension between fundamentals and valuations is likely to remain a key factor influencing investor positioning in the coming months.
About the Author
