Indian stock markets have become the second-least preferred in Asia, according to the latest Bank of America (BofA) fund manager survey. The report highlights a decline in investor confidence as foreign investors pull out and earnings growth remains sluggish.
Since the beginning of 2025, India’s benchmark indices have struggled, leading to a sharp decline in the Nifty 50. The index has fallen 13% from its all-time high of 26,277, which it had reached on September 27 last year. Currently, Nifty 50 is at its lowest point in eight months.
Investor sentiment toward Indian equities has weakened significantly. The BofA survey reveals that 19% of fund managers are now underweight on Indian stocks for the next 12 months, nearly doubling from the 10% recorded in January. This suggests that investors are reducing their exposure to Indian markets, indicating a shift in preference toward other Asian economies.
In contrast, Japan remains the most favored market among investors, backed by a strong economic outlook and record-high market performance. Taiwan holds the second position, though at a considerable distance behind Japan. Meanwhile, investor interest in Chinese equities has made a surprising turnaround.
China, which was previously ranked as the least-preferred market in January’s survey, has now jumped to the third-most favored stock market in Asia. While concerns about China’s economy persist, investor sentiment has improved. AI has emerged as the most attractive sector, and fund managers see a more stable economic growth outlook compared to the recent two-year lows. This has increased confidence in regional stocks, with potential for re-rating and earnings upgrades.
The overall outlook for Asia-Pacific equity markets (excluding Japan) has also improved. According to BofA, 84% of fund managers expect higher levels in the region’s stock markets over the next 12 months. Investors no longer consider these markets to be overvalued, and consensus earnings expectations are seen as reasonable. This suggests there is potential for upgrades in stock valuations and earnings forecasts in the near future.
