According to reports from Upstox, India has been identified as Asia's least-preferred market in BofA's latest survey, replacing Indonesia, despite the country's strong market fundamentals. The survey, conducted among 98 fund managers overseeing a combined $272 billion in assets, found that 32% of respondents were net underweight in India. The responses were collected between August 7 and August 13, highlighting a disconnect between India's actual market performance and international investor sentiment, raising questions about the factors influencing foreign investment decisions in the Indian equity markets.
As reported by Upstox, India has demonstrated robust market performance with strong Nifty earnings and significant foreign institutional investor (FII) inflows exceeding $4 billion. According to Bloomberg-compiled data, global investors have purchased more than $4 billion worth of Indian stocks so far this quarter, the highest inflow among emerging markets in the region. Corporate earnings have also shown resilience, with earnings of companies in the benchmark NSE Nifty 50 rising 18% YoY during the latest three-month period, significantly exceeding the 10% growth projected by Motilal Oswal Financial Services. These positive financial metrics suggest that India's underlying market strength may not align with the survey's findings, indicating potential challenges in communicating the country's investment appeal to international investors.
According to the BofA survey, the lack of clear exposure to artificial intelligence emerged as the biggest concern surrounding Indian equities, followed by weak economic growth. Fund managers also cited limited reforms and elevated valuations as key reasons for their cautious stance. Despite these concerns, the survey findings come despite Indian equities witnessing strong foreign inflows in the current quarter. The Nifty 50 remains among Asia's weakest-performing major indices this year, declining around 8%, facing pressure from rising energy costs amid renewed concerns over the US-Iran conflict and elevated global crude prices.
The findings come as Indonesia's benchmark Jakarta Composite Index has gained more than 20% from its June low, with investor sentiment towards Indonesia improving significantly. Meanwhile, Taiwan and Japan continued to remain the preferred Asian markets among investors. The Nifty 50's 8% decline this year has contributed to India's position as the least-favoured Asian market, despite the country's strong fundamentals and robust earnings growth. This performance gap highlights the challenge of translating positive financial metrics into sustained foreign investor confidence in Indian equities.
