India tops Asia’s investment radar as growth outlook brightens

India has emerged as the most preferred equity market in Asia, overtaking Japan, according to the latest Asia Fund Manager Survey by Bank of America Securities. Improved economic growth prospects and India’s strategic position in global supply chain realignment have driven investor optimism, making sectors like infrastructure and consumption key focus areas.

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India has emerged as the most favoured market in Asia, according to the latest Asia Fund Manager Survey by Bank of America Securities. The survey, completed on May 8, shows that India overtook Japan for the top spot, while China made a notable jump to third place from the bottom rank in the previous month. Thailand continues to be the least preferred market in the region.

The survey attributes this shift in investor sentiment to a turnaround in the region’s economic growth outlook, which has led to improved expectations for market returns. Additionally, consensus earnings estimates appear reasonable and leave room for future upward revisions, suggesting more potential gains ahead.

India’s top ranking stems from its position as a likely beneficiary of global supply chain re-alignments, particularly in the wake of tariff-related disruptions. Investors see India as strategically placed to gain from companies moving operations out of China. Within India, infrastructure and consumption remain the key investment themes drawing the most interest.

For the broader Asia ex-Japan portfolio, fund managers are currently overweight on telecom and software sectors. On the flip side, they are underweight on energy, materials, and consumer discretionary sectors, excluding retail and e-commerce. The outlook for the semiconductor sector has improved significantly, reflecting increased investor confidence in tech-driven themes.

In Japan, banks remain the top sector pick due to their benefit from rising interest rates. Real estate has also gained traction, climbing to the second-most favoured sector among investors. Meanwhile, in China, themes related to artificial intelligence, semiconductors, and corporate buybacks or dividends are leading investor interest. Notably, optimism around China is returning, with only 16% of investors now looking for opportunities elsewhere—down from 26% last month. Additionally, a record 10% of surveyed investors report being fully invested in Chinese markets.

These shifts highlight a dynamic rebalancing of investor confidence across Asia, with India standing out as the leading destination for capital allocation.