India has emerged as the top Asian market choice for fund managers, according to a recent Bank of America (BofA) Securities survey. This shift in preference indicates a renewed interest in the Indian stock market, positioning it ahead of Japan, China, and Singapore.

Key Findings of the Survey

The BofA Securities survey revealed that 42% of fund managers favor India over other regional markets. Japan followed with 39%, while China and Singapore garnered 6% and 3% respectively. The survey included responses from 109 panelists with $234 billion of assets. The survey, conducted between May 2 and May 8, 2025, included 208 global panelists managing $522 billion in assets, with 174 participants and $458 billion in AUM responding to the global FMS segment.

Reasons for India's Popularity

Several factors contribute to India's rise as the most favored market. The survey suggests that India is perceived as a likely beneficiary of supply chain realignments resulting from global trade tensions and tariff effects. Additionally, infrastructure development and strong consumption trends in India continue to attract investor interest. India's heavier dependence on domestic consumption over exports makes it a relative haven amid tariff-driven volatility in global markets.

Sectoral Focus

Fund managers are particularly focused on the infrastructure and consumption sectors in India. These sectors have become top investment themes, highlighting the tactical approach fund managers are adopting toward investing in India's equity market.

Comparison with Other Markets

India's stock market performance has outshone Japan's. As of May 2025, the Nifty50 benchmark has risen 4% since January, while Japan's Nikkei 225 index has fallen 4.4% in the same period. This difference in performance further emphasizes India's growing attractiveness among fund managers. According to the International Monetary Fund (IMF), India is also poised to surpass Japan as the world's fourth-largest economy this year.

Improving Economic Sentiment

The survey also highlighted an improving sentiment around economic growth in the Asia-Pacific region. While 58% of fund managers still expect an earnings slowdown, this is a notable decrease from 78% in the previous month, signaling a potential turnaround in outlook. Current earnings forecasts are not viewed as overly optimistic, suggesting possible room for upward revisions.

Shift in Sentiment Toward Semiconductors

The survey observed a change in fund managers' sentiment toward semiconductors. The percentage of participants anticipating a downturn in the semiconductor cycle has fallen to 42%, compared to 59% last month. This shift indicates a growing optimism regarding the semiconductor industry's future among fund managers, further highlighting their strategic focus on sector-specific investments.

Potential Risks

Despite the positive outlook, some analysts caution against complacency. CLSA has flagged a risk to India's relative outperformance, suggesting that India's "hiding place" advantage may diminish as geopolitical tensions cool and the US-China trade truce gains ground.

Overall, the BofA Securities survey reflects a strong preference for India among fund managers in Asia, driven by its potential to benefit from supply chain shifts, strong domestic consumption, and a focus on infrastructure development. While challenges remain, India's rise as a top market choice signals growing confidence in its economic prospects.