The appeal of Indian stocks within Asia's capital allocation landscape is accelerating its decline. As the artificial intelligence theme returns to the forefront of market focus, capital continues to flow into North Asian markets with higher tech weightings such as South Korea and Japan. Indian stocks not only significantly underperform their regional peers but have also become the most underweight market for Asian fund managers.
BofA Securities' latest survey reveals that Indian equities have become the market with the lowest overweight proportion among Asian fund managers. The survey was conducted from April 2 to 9, covering 90 participants managing assets totaling $247 billion.
Meanwhile, Goldman Sachs launched a &#34;relative value trade&#34; this week, recommending a long position in South Korea while shorting India, the Philippines, and Thailand.
This divergence in capital flows is clearly reflected in market performance. Although the Indian Nifty 50 index has rebounded by over 8% since the beginning of the month, it pales in comparison to the at least 15% gains recorded by benchmark indices in South Korea and Japan individually. The MSCI Pacific ex-Japan index also gained more than 12% during the same period. Analysts point out that India lacks pure-play AI concept stocks and, as an economy heavily dependent on oil imports, remains more vulnerable to oil price shocks triggered by conflicts in the Middle East. These two structural disadvantages may cause it to continue underperforming.
<h2>Rising Appeal of North Asian Tech, India Becomes Largest Underweight Market</h2>
The resurgence of the AI theme is reshaping the pattern of capital flows across Asia. As investor enthusiasm for the AI-related supply chain intensifies, markets in South Korea and Japan with higher technology weightings have emerged as the primary beneficiaries. Benchmark indices in all three regions have gained no less than 15% this month, significantly outperforming the overall Asia-Pacific average.
In contrast, India has been almost entirely absent from this technology-driven rebound. Survey results from BofA Securities indicate that India has become the most underweight stock market for Asian fund managers, reflecting deepening concerns about India's economic fundamentals. Goldman Sachs' relative value trading strategy further confirms this assessment—while taking long positions in North Asian tech markets, India is listed as one of the targets for short selling.
<h2>Oil Price Shock Coupled with Lack of AI, Clear Logic Behind India's Pressure</h2>
Behind the underperformance of Indian stocks lie two overlapping logical threads. First, the Indian market lacks pure-play AI concept stocks and cannot directly benefit from the current global reallocation of tech capital. Second, as an economy highly dependent on oil imports, India faces greater macro-fiscal pressure against the backdrop of ongoing conflict in the Middle East and pressured oil prices.
These two factors together have diminished India's relative attractiveness in Asian asset allocation. Although the Nifty 50 index has rebounded by over 8% from its low point since the beginning of the month, this gain remains relatively low within the Asia-Pacific market and fails to reverse the trend of continued capital outflows.

NFTY

INDA

1678

AI themes reshape Asia's capital landscape, marginalizing India. According to BofA Securities' latest survey, India has become the most underweight market among Asian fund managers; Goldman Sachs simultaneously initiated a relative value trade favoring long Korea and short India. The Nifty 50 posted less than 9% gains this month, significantly lagging behind the over 15% surge in Korean and Japanese markets

- The attractiveness of the Indian stock market to Asian investors is declining as funds shift towards North Asian markets, particularly Korea and Japan, capitalizing on the AI theme resurgence.  
- A recent BofA Securities survey indicates that Indian stocks have the lowest overweight ratio among Asian fund managers, with Goldman Sachs suggesting a strategy of going long on Korea while shorting India, the Philippines, and Thailand.  
- India's lack of AI-focused companies and its reliance on oil imports, which makes it vulnerable to price fluctuations due to geopolitical conflicts, contribute to its status as the most underweight market in Asia, despite a recent Nifty 50 rebound.

Wallstreetcn

Xtrackers Nifty 500 India ETF

ISHRS MSCI S Korea Capped

First Trust India Nifty 50 Equal Weight

ISHRS MSCI India

Nomura Holdings, Inc.

Bank of America

Goldman Sachs

BANK OF AMERICA CORPORATION DEP SHS REP 1/1000TH INT NON CUM PFD QQ

BANK OF AMERICA CORPORATION DEP SHS REP 1/1200TH PRF SERIES '5'

BANK OF AMERICA CORPORATION 7.25% NON-CUM PERP CONV PFD SER L

BANK OF AMERICA CORPORATION 5.875%NON CUM DEP SHS REP1/1000TH SER HH

BANK OF AMERICA CORPORATION DEP SHS REP 1/1200TH PRF SERIES '2'

BANK OF AMERICA CORPORATION 5% DEP SHS REPR 1/1000TH NON CUM PFD LL

BANK OF AMERICA CORPORATION DEP SHARES REP 1/1000TH PERP PFD SER 'E'

BANK OF AMERICA CORPORATION INCOME CAPITAL OBLIG NTS DUE 15/12/2066

BANK OF AMERICA CORPORATION 4.375% DP SH RP 1/1000TH IN NON CU PF NN

BANK OF AMERICA CORPORATION DEP SH REP 1/1200TH PRF SER 1 USD25

BANK OF AMERICA CORPORATION 5.375%DEP SHS REP 1/1000TH NON CUM SR KK

BANK OF AMERICA CORPORATION 6%NON CUM DEP SHS EACH REP 1/1000 SER GG

BANK OF AMERICA CORPORATION DEP SHS REP 1/1200 PFD SER 4 USD25

BANK OF AMERICA CORPORATION DEP SHS REP 1/1000TH NON CUM PFD SER SS

BANK OF AMERICA CORPORATION 4.125%DEP SH REP 1/1000 PFD SER PP USD25

Bank of America Corp

GS Hldg R

Capital Flows Shift to East Asian 'Tech', Indian Stocks Face Further Pressure