India Among Top 3 Least Favoured Asian Stock Market Says BofA - Market Expert Disagrees

Indian stock markets are among the three least-favoured Asian markets as per a report by BofA Securities. The report was based on a survey in which 182 panellists with $513 billion worth of assets under management (AUM) participated and as many as 111 panellists with $214 billion worth of AUM responded to regional FMS questions between January 10 and 16.

The report found that China and Thailand were the other two Asian countries where fund managers are even more underweight compared to Indian equities. Additionally, the report claimed that 10 per cent of fund managers who were part of the survey are underweight on Indian equities from a 12-month perspective.

Deven Choksey the Managing Director of DRChoksey FinServ Pvt. Ltd. told Outlook Money that when it comes to Indian markets, investors should look at it from a longer perspective than 12 months. He added that in the short-term some opportunities in Indian markets may not be as attractive since valuations are on the higher side.

“I think from the long-term perspective opportunities in Indian markets are attractive. Based on a 12-month perspective, I think some opportunities may not be as attractive because the valuations are always on the higher side. So I think one should look at it a little long-term perspective,” Choksey said.

The report also claimed that Global fund managers expected less than 5 per cent returns from Asian stocks (apart from Japan) in a year. Choksey disagreed with the projection and added that individual stock-specific opportunities are more important than index-specific projections.

“Generalisation is not correct actually. We believe that individual stocks specific opportunities are more important than index specific that somebody is expressing,” Choksey said.

The brokerage said in its report that among Asian markets, Japan was the most preferred with 53 per cent of fund managers giving the markets an overweight rating. Taiwan and South Korean stock markets emerged as the second and third most preferred Asian markets.

“The optimism on Japan remains unscathed, as 20 per cent of the participants surveyed by BofA expect a double-digit return from equities in the next 12 months,” BofA said.

Choksey explained that fund managers are bullish on Japan even amid the overall bearish sentiment for Asian markets. He added that the country’s economy is on a path of recovery which might be the reason for fund managers prefer Japan.

“Well, I think Japan is on the path of recovery. I think they are right now taking corrective steps to bring the economy back into higher recovery. So, certainly, I think that there is a little bit more preference,” Choksey told Outlook Money.

Indian indices such as the Sensex have corrected sharply from from the all-time high seen at 85,978.84 levels in September 2024 by declining nearly 10,000 points, or 11.79 per cent in just four months. Experts opine that geopolitical instabilities, uncertainty regarding Trump administration policies and macroeconomic headwinds such as high food inflation and US bond yield played a significant part in causing the decline.

Choksey said that the headwinds and the decline do not stop the progress of the country. He added that Indian markets have seen such unfavourable conditions in the past as well. He also said that he expects growth to continue in the long term for India.

“They are not permanent. I think we have seen in the last 40 years, a number of times high inflation, high interest rate, high fiscal deficit, and current account deficit, but I think that does not stop the progress of the country. So, I think this survey is basically looking at the near-term future and outlook. In the long-term, the growth will continue,” Choksey said.

Choksey also said that while the sentiment of fund managers may be bearish on India in the short-term, on a long-term basis India was likely to become the choice of investment on account of long-term investment. Choksey also projected that the benchmark Nifty50 index was likely to trade between 21,200 to 25,200 levels in 2025.

“I have no doubt about it because the kind of growth that I am talking about has all the potential that Indian markets will have for choice of investment. Benchmark indices could move between 21,200 to 25,200. That's a broader range you may see,” Choksey said.