New Delhi: India has slipped from being fund managers’ top investment choice in Asia to their least favoured market within three months, according to a Bank of America Corp survey released this week.
The survey, which polled 99 fund managers overseeing $183 billion in assets, found that 30 per cent were “underweight” on India. Thailand followed with 20 per cent, and Malaysia with 10 per cent. Japan emerged as the most preferred market, while China took the second spot.
In May, India had overtaken Japan as the top pick, seen then as a safer option during the initial phase of US President Donald Trump’s trade actions. The turnaround reflects unease over Trump’s decision to double tariffs on Indian goods to 50% in response to the country’s purchases of Russian oil.
“India is affected by President Trump’s announcement of 50 per cent tariffs,” strategists including Ritesh Samadhiya wrote in an August 12 note, adding that sentiment toward China had “become more enthusiastic.” Global funds have pulled roughly $4 billion from Indian equities this quarter, weighed down by trade tensions, weak corporate earnings, and high valuations. In contrast, domestic institutional and retail investors have increased their exposure. Data from the Association of Mutual Funds in India (AMFI) showed equity-focused mutual funds drew a record Rs 42,700 crore ($4.9 billion) in net inflows during July, largely from individual investors. Despite this domestic support, Indian shares recorded their longest weekly losing streak since the Covid-19 outbreak, underperforming key Asian peers in 2023. In July, Chinese equities beat Indian stocks by about eight percentage points — the widest margin since February. “Trump’s harsh tariffs and the straining of relations between US and India have impacted market sentiment,” said VK Vijayakumar, chief investment strategist at Geojit Investments. Tepid earnings and steep valuations have “emboldened the bears to increase short positions,” he added.