Dalal Street’s fall from investor favor, as reflected in Bank of America’s latest survey, underscores a growing sentiment shift among Asia-Pacific fund managers. Once a top choice, India now ranks fourth, with only 10% of surveyed fund managers overweight on Indian equities—far behind Japan (32%), Taiwan (19%), and South Korea (16%).
This decline comes amid a prolonged two-month consolidation in the Nifty index, during which global markets—especially semiconductor-heavy economies like Taiwan and South Korea—have surged ahead, powered by tech demand and expectations of policy reforms.
Particularly concerning is the sharp fall in interest in India’s IT sector, with BofA’s India IT services indicator hitting a 20-month low. The industry, once a dependable engine of growth, is now seen as underperforming, possibly weighed down by slowing global demand and margin pressures.
Dr. VK Vijayakumar of Geojit Financial Services highlighted the market’s stagnant state and warned that even favorable news, like the India-US interim trade deal, has already been priced in. However, he noted that a surprise reduction in proposed tariff rates—if lower than 20%, possibly around 15%—could act as a fresh trigger.
On the sectoral front, while IT drags, private banks show potential. Vijayakumar believes concerns over net interest margin (NIM) compression will ease post-Q2, making these stocks attractive for medium-term investors.
In short, with Indian equities losing short-term appeal compared to tech-driven Asian peers, Dalal Street needs a new catalyst—be it tariff reform, policy stimulus, or corporate earnings rebound—to regain momentum and global fund flow interest.
