India has replaced Indonesia as Asia’s least-preferred stock market in a survey of fund managers by Bank of America Corp., signalling growing caution toward a market that’s among the world’s worst performers this year.
The lack of a clear AI exposure remains the key concern for Indian equities, with weak growth emerging as the next most important risk, according to the survey, which showed 32 per cent of the respondents were net underweight on the nation. Lack of reforms and high valuations also emerged as reasons for the bearish outlook on Asia’s fourth-largest equity market.
In contrast, sentiment improved for Indonesia, with 27 per cent of the fund managers saying they were net underweight on the market, compared with 32 per cent in July. Taiwan and Japan remain investors’ most preferred regions. A total of 98 panelists with $272 billion of assets responded to the survey’s questions between August 7 and August 13.
The survey findings align with a decline in Indian stocks over the past two weeks despite an improving earnings outlook, suggesting investors remain wary of the market even as its fundamentals strengthen.
Global funds have purchased more than $4 billion in local stocks this quarter – the most among regional emerging markets – after record outflows in first half of the year, data compiled by Bloomberg show. Earnings for benchmark NSE Nifty 50 members jumped 18 per cent from last year in the most recent three-month period, ahead of Motilal Oswal Financial Services Ltd.’s estimate of 10 per cent growth.
Indian stocks were last termed the least preferred in the BofA poll in May, as the country faced pressure on growth from rising energy costs following the US-Iran war that triggered a rally in global crude oil prices. With no sign of progress toward resolving the conflict, energy prices are climbing again, weighing on investor sentiment.
While the Nifty 50 has jumped 8 per cent from a recent low in March, it remains the second-worst performing major market in Asia this year, having lost 8 per cent. It’s on track to snap a historic run of 10 straight years of annual gains.
Meanwhile, the improvement in sentiment for Indonesia reflects the more than 20 per cent rally in the benchmark Jakarta Composite Index from a June low, following the central bank’s measures to stabilise the currency and fading fears of a downgrade to frontier-market status by MSCI Inc.
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