India Replaces Indonesia As Asia’s Least-Preferred Stock Market In BoA Survey

India has overtaken Indonesia as Asia’s least-preferred stock market among fund managers surveyed by Bank of America, highlighting growing investor caution towards Indian equities despite signs of improving corporate earnings, Bloomberg reported.

According to the report, the survey found that 32% of respondents were net underweight on Indian stocks, making India the most negatively viewed major market in the region.

Investors cited the absence of significant artificial intelligence exposure as the biggest concern, followed by expectations of weaker economic growth.

High valuations and a lack of reforms also contributed to the cautious outlook on India, Asia’s fourth-largest equity market.

India Faces Growing Investor Caution

The findings come despite a stronger earnings performance. Profits of companies included in the benchmark Nifty 50 rose 18% year-on-year in the latest three-month period, significantly exceeding Motilal Oswal Financial Services’ earlier estimate of 10% growth.

Foreign investors have also returned to Indian equities. Global funds have bought more than $4 billion worth of Indian stocks during the current quarter, the highest inflow among regional emerging markets, following substantial selling during the first half of the year.

However, Indian stocks have weakened over the past two weeks, indicating that investors remain cautious even as corporate fundamentals improve.

India was previously ranked as the least-preferred market in the Bank of America survey in May, when rising energy prices following the US-Iran conflict raised concerns over economic growth and corporate costs.

Indonesia Gains Favour Among Fund Managers

Investor sentiment towards Indonesia has improved considerably. The proportion of fund managers who were net underweight on Indonesian equities fell to 27% from 32% in July.

The shift follows a more than 20% recovery in Indonesia’s benchmark Jakarta Composite Index from its June low. Measures taken by Indonesia’s central bank to stabilise the currency and declining concerns about a possible downgrade to frontier-market status by MSCI have supported sentiment.

Taiwan and Japan continued to be the most preferred markets among investors.

The Bank of America survey gathered responses from 98 fund managers managing $272 billion in assets between August 7 and August 13.

The Nifty 50 remains among Asia’s weakest-performing major benchmarks, down around 8% for the year despite recovering 8% from its March low. If the decline persists, India’s benchmark could end its historic streak of 10 consecutive years of annual gains.