Global fund managers turn cautious on Indian equities as valuations, weak growth and limited AI exposure weigh on sentiment
India has replaced Indonesia as Asia’s least-preferred stock market among global fund managers, according to Bank of America’s latest survey, signalling growing caution toward Indian equities despite signs of improvement in corporate earnings.
The survey found that 32% of fund managers were net underweight on Indian equities, making India the least-preferred market in the region. Indonesia, which previously held that position, saw sentiment improve.
The shift comes as Indian stocks struggle for momentum in 2026. Persistent selling by overseas investors, elevated crude oil prices, a weaker rupee, stretched valuations and subdued domestic growth have weighed on market sentiment. Geopolitical uncertainty and higher global bond yields have added to the pressure.
Limited AI exposure emerges as key concern
One of the biggest concerns among fund managers is India’s limited exposure to the artificial intelligence-driven investment boom. Weak economic growth was identified as another major risk, while high valuations and a perceived lack of reforms also contributed to the bearish outlook.
The cautious stance comes despite stronger corporate earnings. Profits of companies in the Nifty 50 rose 18% year-on-year in the latest three-month period, while global funds have also returned to Indian equities after heavy selling earlier in the year.
However, investors appear to be finding more attractive opportunities elsewhere in Asia. South Korea has benefited from strong semiconductor and technology gains linked to the AI theme, while Japan and Taiwan continue to rank among investors’ preferred Asian markets.
India’s stock market has also remained among the region’s weaker performers this year. The Nifty 50 has recovered from its recent lows but remains down about 8% in 2026, putting its decade-long streak of annual gains under threat.
The latest BofA survey, therefore, highlights a growing gap between improving corporate earnings and investor appetite for Indian equities, with global fund managers increasingly focused on valuation, growth prospects and exposure to the next major technology cycle.
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