India emerges as least preferred market for Asia-Pacific fund managers, BofA survey shows

India has emerged as the least preferred market for Asia-Pacific fund managers, according to the latest survey by BofA Securities. The survey, which covered 203 panelists managing $581 billion in assets under management, revealed that the proportion of fund managers being 'underweight' on India grew to 32 percent in the first half of August.

For comparison, the 'underweight' figures stood at 27 percent for Indonesia, 23 percent for the Philippines, and 18 percent for China. Meanwhile, Taiwan remains the most preferred market with 55 percent of respondents being overweight, followed by Japan at 50 percent and South Korea at 23 percent.

According to the findings, Asia-Pacific fund managers are pulling back from aggressive technology bets and shifting toward defensive sectors. A key concern highlighted for Indian equities is the lack of clear artificial intelligence exposure, cited by 32 percent of respondents. Additional risks noted by fund managers included weak growth at 18 percent and a lack of reforms at 18 percent.

Valuations have also emerged as a growing concern for India, with 9 percent of fund managers flagging it as a worry, up from 4 percent in July. However, the depreciating rupee is reportedly no longer a primary concern for fund managers.

Globally and regionally, investor sentiment reflects a broader rotation away from cyclicals and technology toward defensive areas like utilities, banks, consumer staples, healthcare, and telecoms. A striking 59 percent of surveyed investors are now hedging AI downside risk by rotating into value, cyclical, and defensive sectors. Nearly two-thirds of respondents indicated they require clearer evidence of AI monetisation—specifically actual revenue generation—before increasing their exposure to AI-related stocks.

In broader regional market movements, Taiwan regained its position as the market seen as benefiting most from the next phase of the AI cycle, cited by 27 percent of respondents, followed jointly by Japan and China at 18 percent each. In Japan, investor positioning remained heavy in banks and semiconductors, though Bank of Japan policy normalisation emerged as a concern for 23 percent of respondents.

"This survey highlights a distinct shift in strategy among global fund managers toward defensive sectors and clear monetization metrics, particularly regarding artificial intelligence. For the Indian market, addressing concerns around growth, structural reforms, and establishing clearer technological exposures will be critical to regaining institutional confidence amidst evolving global capital allocations." — Dr. Shishir Gupta, Founder & CEO, StartupLanes