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India has dropped to the fourth spot in the pecking order of Asia-Pacific investment destinations, as per the latest Bank of America (BofA) fund manager survey, signalling a significant dip in global investor appetite for Indian equities. The findings come at a time when the domestic markets, especially the Nifty index, have been stuck in a narrow consolidation range for nearly two months, reflecting uncertainty and lack of strong triggers.
India's weight in global portfolios declining
According to the BofA report, only 10 per cent of fund managers are currently overweight on India, a sharp drop compared to other regional markets. In contrast, 32 per cent favour Japan, followed by 19 per cent for Taiwan and 16 per cent for South Korea, thanks to their robust performance in key growth sectors and emerging policy tailwinds.
“Both Taiwan and Korea are benefiting from the resurgent semiconductor cycle,” the report highlighted. South Korea is also attracting flows on hopes of reform-friendly policies under its new leadership.
Semiconductor demand steals the show
The shift in investor sentiment comes amid a global rally in semiconductor-related stocks. Taiwan and South Korea, which have deep exposure to chip-making supply chains, are reaping the rewards of this cycle. Japan, meanwhile, continues to attract allocations driven by structural reforms, strong corporate governance, and a weakening yen aiding exports.
Indian IT sector under pressure
One of the most notable takeaways from the survey is the sharp drop in sentiment toward India’s IT services sector, which has traditionally been one of the country’s most attractive sectors for foreign investors. BofA said its India IT services indicator has dropped to a 20-month low, underscoring concerns around growth, global demand, and margin pressure.
Dalal Street in consolidation mode
Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted that Indian markets are in a wait-and-watch phase. “There are no triggers for the market to break out of the consolidation range in which it has been stuck for two months now,” he said.
While he noted that positive developments such as the India-US interim trade deal have already been priced in, Vijayakumar added, “One positive and surprise factor that can trigger a rally is a tariff rate much below 20 per cent, say 15 per cent, which the market has not discounted.”
On sector views, he highlighted that IT results remain underwhelming, but expressed optimism around banks. “Leading private sector banks are in a defensive mode now. The market is discounting NIM compression in the Q1 results. But this will reverse from Q3 onwards, making them good buys now,” he added.
What investors should watch
The BofA findings make it clear that Dalal Street is no longer the default investment choice in the Asia-Pacific region. To regain its spot among top destinations, India will need fresh catalysts—be it from reforms, corporate earnings, or favourable global cues.
For now, investors are gravitating toward economies riding the semiconductor wave or those implementing clear economic reforms. Unless Indian markets find new drivers, flows may continue to be diverted to more agile Asian peers.
English (US) ·