Global investors are showing renewed confidence in India, according to Bank of America's (BofA) latest Asia Fund Manager Survey (FMS). The survey, conducted between December 5th and 11th with 119 regional respondents managing $293 billion in assets, reveals a shift towards a "mildly overweight" allocation for India. This indicates that fund managers are allocating a slightly larger portion of their portfolios to Indian equities than their benchmark weighting.
This positive sentiment towards India emerges as China slips into "underweight" territory, suggesting a relative decline in investor confidence in the Chinese market. Japan continues to be the top investment choice in the region.
The BofA survey highlights India's appeal as a diversification strategy, especially when compared to North Asian markets heavily influenced by the artificial intelligence (AI) sector. The report suggests that India is viewed as a "diversification play against AI-driven markets". This perspective is reinforced by a "Goldilocks" backdrop of strengthening global growth and controlled inflation expectations across Asia, excluding Japan.
The survey indicates a steady improvement in India's net overweight positioning after hitting a low point in August. As of December, 10% of fund managers are net overweight on India, a notable increase from 0% in November. This makes India the third most favored market in Asia, trailing only Japan and Taiwan.
Several factors contribute to this renewed interest in the Indian market. Robust domestic consumption trends, infrastructure development, and ongoing supply chain realignments are cited as key drivers. Earlier in the year, another BofA survey in May had already identified India as the most preferred equity market in the Asia Pacific region, attributing this to positive sentiment surrounding these factors and expectations that India would benefit from supply chain shifts resulting from tariff effects.
While the long-term structural view on China is no longer negative, investors are likely waiting for tangible signs of stimulative policies before increasing their exposure. Concerns about waning household risk appetite in China, with a preference for saving over investing, may also be contributing to the shift in investor sentiment.
Overall, the BofA survey paints a picture of global investors who are still constructive on Asia but are becoming more selective, favoring markets and themes that offer both clear earnings visibility and the potential benefits of structural reforms. India's rise to a mild overweight position reflects renewed confidence in its medium-term growth potential and its value as a portfolio stabilizer alongside North Asian markets driven by AI. The survey also indicates continued positive sentiment towards Taiwan and Korea, fueled by expectations surrounding the semiconductor cycle and Korea's corporate value-up program.
