India Least-Favored Asian Market for Fund Managers in 2026
By Market Desk
BofA survey: India is Asia’s least-favored market. 32% of fund managers are underweight due to AI concerns and weak growth prospects.
India has emerged as the least-favored market in the Asia-Pacific region among foreign fund managers, according to a new BofA Asia Fund Manager Survey. A net 32% of investors are currently holding an underweight position on Indian equities, meaning they are investing less than their benchmark.
The survey, conducted between August 7 and 13, 2026, gathered insights from 105 regional investors who collectively manage $272 billion. This places India below Indonesia, the Philippines, and China in terms of investor preference.
Why India is Falling Behind
Fund managers cited several key reasons for their cautious stance on India’s market. These concerns highlight a shift in investment priorities towards specific technological trends and economic reforms.
- Lack of a clear artificial intelligence (AI) investment play: cited by 28% of respondents.
- Weak growth prospects: noted by 20% of managers.
- Insufficient reforms: mentioned by 16% of the survey participants.
While India offers long-term structural growth, international fund managers are currently prioritizing markets with clearer exposure to the next phase of the technology and AI investment cycle.
Where the Money is Going
Investors are increasingly directing their capital towards markets tied to technology and the AI ecosystem. Taiwan and Japan are the clear favorites in the region, attracting significant capital.
- Taiwan: net 55% overweight position.
- Japan: net 50% overweight position.
- South Korea: 23% overweight position.
The optimism around the semiconductor cycle has seen moderation, but it remains the most preferred sector in Asia excluding Japan. Other tech-related and defensive sectors are also seeing strong interest.
- Semiconductors: net 50% overweight.
- Tech hardware: 32% overweight.
- Healthcare and pharmaceuticals: 32% overweight.
- Banks: 27% overweight.
The AI investment trend is also expanding beyond traditional chipmakers. Investors are identifying opportunities in a broader range of segments within the AI value chain.
- Power and energy: 23% of identified opportunities.
- Data-center infrastructure: 18% of identified opportunities.
- Connectivity/networking: 18% of identified opportunities.
Despite this focus, fund managers are hedging their AI exposure by rotating into value, cyclical, and defensive sectors. Many require clearer evidence of AI monetization or revenue generation before increasing their investments in AI-related stocks.
Other Regional Plays
Japan continues to be a significant favorite, driven by strong positioning in banks and semiconductors, alongside expectations of a Bank of Japan rate hike in September. China, while still underweight (invest less than benchmark), has shown improved economic expectations, with AI/semiconductors and shareholder returns being key investment themes.
The survey highlights three main investment baskets currently favored by global fund managers: AI infrastructure, defensive/value exposure, and Japan. India currently falls outside these preferred categories, indicating a need for clearer alignment with current global investment trends to regain favor.