Fund managers underweight India stocks by net 32%

Fund managers surveyed in a recent poll reported a net 32% underweight position in Indian equities, a reading that the poll described as making India Asia’s least-favored equity market at the time of the survey. Participants said they have adjusted regional allocations accordingly, shifting weight away from India and toward other Asian markets.

The poll framed the positioning as a headwind for regional allocation patterns, while noting that the immediate market reaction was still pending. Managers indicated that, in practice, the underweight stance could translate into a more gradual recovery in India-focused fund flows than headline corporate earnings might imply, particularly among active managers who can alter country weights quickly.

Why managers said India lost favor in the poll Respondents cited several factors behind the net underweight Respondents cited several factors behind the net underweight. They pointed to a perceived lack of clear exposure to artificial intelligence themes, expectations of weaker growth, high valuations, and limited momentum on reforms as the main reasons given for the shift in preference. Portfolio managers also highlighted valuation multiples and near-term growth uncertainty as considerations that make a move back into India conditional. According to the survey, managers said they would look for clearer signals either from policy developments or from corporate earnings before increasing allocations. Offsets: earnings and foreign inflows, but not enough to flip positioning While the overall stance remained underweight, the poll also recorded countervailing developments. Respondents noted improving corporate earnings and renewed foreign inflows, which they described as a partial offset to the negative positioning in India.

India Asia

The survey suggested this balance of forces is shaping how quickly managers are willing to shift. Even with better earnings trends and returning inflows, participants portrayed the decision to reduce underweights as dependent on confirmation that growth and earnings strength are durable and that valuation concerns become easier to justify.

Regional rebalancing and the next decision points

Managers told the poll they have rebalanced regional weights, moving away from India toward other Asian markets. The poll also noted a change in relative rankings, stating that Indonesia had previously been ranked lower than India, underscoring that preferences within Asia can shift as managers revisit risk, growth assumptions, and valuation metrics.

Respondents described two-sided triggers for the positioning going forward. If foreign inflows accelerate, managers said they would reduce underweights; if growth outcomes disappoint, underweights could deepen. By September 30, 2026, participants pointed to monthly allocation reports and the next round of corporate results as key checkpoints for whether the net underweight persists or reverses, influencing near-term portfolio rotation across Asian equities.