India Slips to 4th Place in Asia Stock Market Rankings as Semiconductor Rally Lifts Rivals

As per a Bank of America (BofA) survey, India has slipped to 4th position among the most favoured Asian stock markets, as overseas investors turn towards semiconductor-driven rallies in Japan, Taiwan and South Korea, shifting focus away from Indian equities facing consolidation and sector-specific challenges.

Semiconductor Boom Fuels Rival Markets While India Falters

Japan has emerged as the top stock market in Asia, followed by Taiwan and South Korea, largely benefiting from the global semiconductor cycle. India, once the regional leader, has dropped due to limited market triggers and persistent weakness in key sectors like IT. Only 10% of foreign fund managers now hold overweight positions in India compared to 32% in Japan, 19% in Taiwan and 16% in South Korea.

Stagnation in Indian Markets and Sector Rotations

The Indian stock market has remained range-bound for over 2 months, struggling to break out of its consolidation phase. The absence of new catalysts and underwhelming performance from the IT sector have weighed heavily on investor sentiment. The IT services sector has seen its attractiveness diminish, with its performance indicators at a 20-month low. Meanwhile, attention within India is shifting towards the consumption and infrastructure sectors.

Foreign Investor Behaviour Reflects Rising Uncertainty

Foreign Institutional Investors (FIIs) have been largely net sellers so far in 2025, despite turning net buyers in recent weeks. This inconsistent pattern highlights uncertainty regarding India’s near-term equity prospects. Yet, the domestic market has shown resilience against macro events like global tariff changes and geopolitical tensions, providing some cushioning effect.

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Valuation Indicates Long-Term Potential Despite Near-Term Pressures

The Indian equity market is currently trading at a 2.5% discount to its 15-year average price-to-earnings ratio. This reflects short-term pessimism but also suggests potential for recovery if fresh growth triggers emerge. Investor focus has now shifted towards sectors with domestic policy support and visible growth prospects like banking and infrastructure.

Conclusion

India’s slip in investor preference rankings reflects global shifts in capital flows, with semiconductor-heavy markets drawing strong momentum. While domestic equities face consolidation and IT sector headwinds, valuation metrics and sectoral rotation hint at underlying strength that may unfold as macro conditions stabilise.

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