India has regained positive momentum among global investors, according to Bank of America’s latest fund manager survey. The country is now rated “mildly overweight,” climbing to become the third most preferred market in Asia, while China’s allocation has fallen to an underweight position.
What Does the Survey Data Show?
The December Asia Fund Manager Survey reveals a clear shift. Now, 10% of fund managers report a net overweight position on India, a significant rise from 0% in November. This places India behind only Japan and Taiwan in regional preference. The survey gathered responses from 119 regional fund managers overseeing $293 billion in assets.
Why Are Investors Turning to India?
Analysts point to India as a major diversification choice. While North Asian markets are strongly shaped by the volatile artificial intelligence (AI) sector, India presents a separate growth narrative. It is seen as being in a “Goldilocks” phase, with stable inflation and rising global growth. Investors believe it gains from supply chain shifts away from China, strong demand, and infrastructure spending.
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How Does This Compare to Earlier This Year?
This marks a recovery for Indian markets. In May, India was ranked the most preferred market in the Asia-Pacific region, overtaking Japan. While it has not recaptured the top spot, the return to an overweight rating indicates restored confidence after a period of neutral sentiment.
Which Market is Currently the Top Pick?
Japan remains the preferred market for fund managers across the region. Optimism around government policies continues, and short-term market falls are viewed as healthy consolidation phases. On a sector level, investors favour banks and semiconductors, with the latter benefiting directly from the expanding artificial intelligence investment boom.
What is the Outlook for China?
The survey highlights declining sentiment toward China. Although long-term structural views have improved from “grim,” immediate growth momentum has stalled. With valuations no longer attractive and household risk appetite diminishing, investors are waiting for clear policy stimulus. As a result, China’s allocation has been downgraded to an underweight rating.
What is the Overall Investor Mood?
Fund managers across Asia remain optimistic, backed by a strong recovery in corporate profits. However, their return expectations have softened. Hopes for much higher profits in the near term are being restrained by elevated valuations that stand well above long-term historical trends.
Immediate FAQs
Q: What does “mildly overweight” mean?
A: It means fund managers, on average, are putting a slightly higher portion of their portfolios into Indian equities compared to what the benchmark index suggests.
Q: Why is India considered a diversification play?
A: In contrast to the AI-focused rallies in markets like Taiwan and Korea, its market drivers (infrastructure, domestic consumption) provide a balance in an investment portfolio.
Q: What caused India’s rating to improve from November?
A: Renewed investor inflows were brought about by a mix of perceived stable economic conditions, robust corporate earnings, and its strategic role in global supply chain movements.
Q: What would make investors more bullish on China again?
A: The survey suggests investors need to see concrete signs of substantial economic stimulus and policy action to boost domestic confidence and growth.
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