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India has replaced Indonesia as Asia’s least-favoured stock market in Bank of America’s latest survey. The August survey covered 98 fund managers overseeing $272 billion in assets. Responses came between August 7 and August 13, highlighting growing caution toward Indian equities.
About 32% of managers remained net underweight in India, driven mainly by weak growth, high valuations, limited reforms, and unclear artificial intelligence exposure.
The BofA survey shows investors shifting toward markets with stronger AI links and improving momentum. Taiwan and Japan remained the preferred Asian markets, while Indonesia improved after a strong market rebound.
Fund managers reduced their net underweight position on Indonesia to 27% from 32% in July. The shift places India at the bottom of regional investor preference despite improving earnings and foreign inflows.
Limited AI exposure emerged as the biggest concern for Indian equities, according to the survey. Investors see fewer listed Indian companies benefiting directly from the global AI investment cycle. Weak economic growth ranked as the second major concern among surveyed managers.
High valuations also continue to discourage investors seeking stronger returns across Asian markets. Concerns about the pace of reforms further weakened the investment case for India. Rising energy costs have added another layer of pressure as global crude prices climb again.
The cautious stance contrasts with improving market fundamentals. Global investors purchased more than $4 billion of Indian stocks during the current quarter. Nifty 50 companies also reported 18% year-on-year earnings growth in the latest quarter.
The Nifty 50 remains down about 8% this year despite recovering 8% from its March low. Continued weakness could also end the index’s 10-year streak of annual gains. Indonesia, meanwhile, gained over 20% from its June low, helping restore investor confidence.
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