Title: Fund Managers Show Caution Towards Indian Stocks Amid Mixed Signals
Date: August 20, 2026
Location: New Delhi – Despite a rise in corporate profits and over $4 billion in foreign investments this quarter, India’s stock market is now the least favored among fund managers in Asia.
A recent survey by Bank of America revealed that 32% of fund managers are currently underweight in Indian stocks, ranking India lower than Indonesia in terms of investor interest. Concerns such as India’s minimal involvement in the artificial intelligence (AI) market, weak economic growth, high stock valuations, and a lack of necessary reforms primarily drive this sentiment.
This survey sampled views from 98 fund managers managing a total of $272 billion in assets, with responses gathered between August 7 and August 13.
Indonesia Gaining Ground
Indonesia, which was previously seen as the least attractive market, has now edged ahead of India. The latest survey indicates that only 27% of fund managers are underweight in Indonesian stocks, a decrease from 32% in July. Taiwan and Japan continue to be the top choices for investors.
The change comes at a challenging time for Indian markets. The Nifty 50 index has dipped around 8% this year, making it the second-worst performer among major Asian markets. However, it has bounced back by about 8% since hitting a low in March. If current trends continue, the Nifty could see its first year without gains in a decade.
Mixed Optimism in Corporate Earnings
Interestingly, the survey reflects a cautious mood among fund managers even as some economic indicators appear positive. Global investors have infused over $4 billion into Indian stocks this quarter—this figure represents the highest influx in emerging markets. This comes after a period of significant foreign sell-offs earlier in the year.
Corporate earnings have also shown impressive growth, with companies in the Nifty 50 seeing an 18% increase in profits compared to last year. This is notably higher than the anticipated growth of 10%, according to estimates from Motilal Oswal Financial Services.
Despite these signs of improvement, the Bank of America survey indicates that fund managers remain skeptical. Many see India’s limited access to the AI investment landscape as a major drawback. Other concerns include economic growth, high stock prices, and slow reform efforts.
Worries Over Energy Prices
Adding to the challenges for Indian stocks is the concern over rising energy prices, an issue that has previously made India the least favorable market according to earlier surveys in May. The ongoing conflict between the US and Iran has led to increased oil prices, which continue to pose a risk to India’s economic prospects.
In contrast, Indonesia’s market has enjoyed a significant recovery, with the Jakarta Composite Index climbing more than 20% since its low in June. Efforts by Indonesia’s central bank to stabilize the currency, alongside easing fears of a downgrade in its market status, have contributed to a more favorable outlook there.
In summary, while there are some positive signs within India’s stock market, fund managers remain wary, prioritizing caution amid ongoing economic uncertainties.
