Global investor sentiment toward India has taken a sharp downturn, with the latest Asia Fund Manager Survey by Bank of America revealing that India is now the least-preferred market in the region. This is a dramatic shift from May, when India ranked as the top choice among fund managers.
The change comes amid heightened trade tensions following US President Donald Trump’s threat to impose a 50 percent tariff on Indian goods. What was once viewed as a resilient market, shielded by ongoing trade negotiations with the United States, has now seen confidence erode rapidly. According to the survey, 30 percent of respondents are currently underweight on India, marking a steep drop from just a month ago when the country was still in the upper tier of investment preferences.
Where the Money is Flowing Instead
Japan remains the most attractive market for regional investors. Fund managers cite its ongoing corporate reforms, favorable currency conditions, and steady earnings outlook as major draws. There is also anticipation of a potential interest rate hike before March next year, adding to its appeal. China has also climbed the ranks, moving from near the bottom just a month ago to the second most-preferred market. This renewed interest is being driven by stronger growth expectations, a rebound in household spending, and promising opportunities in artificial intelligence, semiconductor manufacturing, and shareholder returns through buybacks and dividends.
India’s Sector Pockets Still Drawing Interest
Although India as a whole has fallen out of favor, some sectors remain appealing to global investors. Infrastructure projects and consumption-driven industries are still drawing attention. However, the overall shift suggests that even these strong points are not enough to outweigh broader macroeconomic and policy concerns at this time.
The Broader Economic Context
The survey also highlighted a growing caution about global and regional economic prospects. Concerns are building over a slowdown in the US labor market, weakening consumer demand, and the broader impact of tariffs on international trade. The number of investors expecting a weaker global economy has risen to 41 percent, while 31 percent foresee a slowdown specifically in Asia.
Looking Ahead
The sudden reversal in sentiment toward India underscores the volatility of investor preferences in an era where political decisions and trade policy can swiftly change market dynamics. For India to reclaim its top spot, analysts suggest that a combination of policy stability, stronger corporate earnings, and reduced trade tensions will be essential.
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