US President Donald Trump‘s 50% tariff threat has turned investment sentiment sharply against the Indian stock market. According to BofA Securities’ latest Asia Fund Manager Survey, India is now the least-preferred market, as compared to being the most-preferred one three months back in May.
A total of 99 panelists with $183 billion of assets responded to the survey’s regional questions and net 30% of them are underweight India. Last month, it was in fourth position.
From top pick to bottom of the list
In May, when India displaced Japan as the most favored market, there was a perception that India will remain largely unscathed because of on-going bilateral trade negotiations between India and US.
The survey noted that the panelists favoring China, which has moved to second place after Japan from third-last in July, has grown at the expense of India. A net of 23% panelists are now overweight as its growth outlook is at five-month high and households to allocate incrementally to spending & investment, it said.
In China, AI/semis and buybacks/dividends are the popular plays, while real estate and green energy fail to gain traction, it said while in India, panelists have increased preference towards infrastructure and consumption plays.
Japan stays on top as reforms boost sentiment
Japan equities continue to be the favourite as corporate reforms, currency, and earnings hold the key to the prospects, with investors anticipating a rate hike before March next year, the survey said. “Both Taiwan and Korea are benefiting from the AI cycle, while Korea gains additional upside from hope surrounding its new leadership’s policy reforms.”
“Following three consecutive months of improvement, growth expectations have pulled back slightly due to investor concerns regarding the effects of a slowdown in the US labor market, weakening consumption, and tariffs,” it said and noted that currently, a net 41% anticipate a weaker global economy, from 31% last month, while a net 31% foresee a weaker Asian economy, a slight deterioration from 26% last month.