Bank of America’s latest monthly survey of global fund managers shows India as the least-favoured Asian equity market among respondents. The result marks a notable shift in sentiment toward a country that has been a central part of many emerging-market strategies.
What the survey says and why it matters
The BofA Global Fund Manager Survey, which polls asset managers about portfolio positioning and market views, recorded India as the Asian market with the largest net underweight by respondents. The survey captures active managers’ expressed allocations and short-term positioning rather than mechanical index weights, and it is watched by market participants for signals about likely cross-border flows and sentiment.
For readers outside India: India is one of the world’s largest equity markets by market capitalisation and a major component of emerging- and Asia-focused funds. When active managers say they are underweight India, it can translate into reduced demand for Indian equities, pressure on the rupee, and changes in the composition of international portfolios. Conversely, strong positive sentiment in such surveys has in past years correlated with inflows and price support for domestic stocks.
Reasons managers cite for reduced exposure
Respondents to the survey cited several factors that explain their underweight positioning. One prominent concern is valuation. After years of strong performance, many Indian stocks trade at price levels that some investors consider expensive relative to historical averages and to peers in the region. High valuations raise the bar for future returns and can make investors cautious when broader global conditions are uncertain.
Another frequent theme in the survey is growth and earnings momentum. A number of managers reported concerns about the pace of economic growth and corporate earnings in India relative to expectations, and some said recent company results and guidance had prompted them to trim exposure. It is important to note that corporate fundamentals vary widely across sectors; the survey reflects broad positioning rather than a uniform view of every company listed in India.
Policy and macro risks also influenced allocations. Managers pointed to concerns about domestic monetary and fiscal dynamics, exchange-rate volatility, and the potential impact of global interest-rate moves on capital flows. Geopolitical and structural considerations — such as the pace of regulatory changes, taxation, and reform implementation — were flagged by some respondents as factors that elevate uncertainty for foreign investors.
Flows, liquidity and investor behaviour
Survey responses highlight how flows and liquidity shape portfolio choices. Several fund managers said they had reduced weighting to India because they preferred markets where central-bank policy or macro indicators provided clearer near-term support. For investors managing large, multi-country portfolios, the ability to redeploy capital quickly is a practical consideration; markets with thinner liquidity or concentrated sectoral leadership can be harder to manage under stress, prompting some managers to favour other Asian markets.
Passive and index-driven flows are a separate influence. India’s inclusion in global indices has increased passive allocations over recent years, but active managers’ reduced appetite can still matter because active money tends to trade more and can exacerbate directional moves. The BofA survey reflects active positioning, which complements but does not directly map to passive index-weight changes.
What this means going forward
The survey is a snapshot of sentiment at a point in time. It does not predict price moves with certainty. Fund managers’ expressed underweight is important because it can change short-term demand dynamics, but fundamental developments — earnings trends, policy decisions in New Delhi, global monetary conditions, and commodity price moves — will have material influence on actual market performance.
For international investors and observers, the shift in manager sentiment is a reminder that India’s high profile in global portfolios also makes it sensitive to changes in relative valuation, macro expectations and risk appetite. Those deciding on allocations will watch incoming economic data, corporate earnings, and any policy announcements for signals that could prompt re-weighting back into Indian equities.
As with any survey, individual responses reflect managers’ strategies and time horizons; not every participant will act in the same way. The BofA survey indicates a meaningful tilt away from India among respondents this month, but whether that posture persists will depend on subsequent developments that either validate or ease the concerns fund managers have expressed.
This article was produced with AI assistance and checked before publication. Editorial policy
