The Fetco Investor Confidence Index (Fetco ICI) in March moved down to the "neutral" zone, according to the Federation of Thai Capital Market Organizations (Fetco).
Investors expected the upcoming election and the US Federal Reserve's slowing of rate hikes to boost market sentiment.
Fund outflows and the Fed's policy to tame inflation undermined confidence.
Fetco chairman Kobsak Pootrakool said the Fetco ICI in March, which anticipated market conditions over the following three months (up to June), stood at 95.65, down 21% from the previous month, moving into the neutral zone.
The SET index fluctuated during March amid worries over the US and European bank turmoil, with the general election scheduled for May being the most supportive factor, followed by the Fed's easing of the pace of interest rates as well as the recovery of tourism in the country.
However, investors are most concerned about fund outflows, followed by the Fed's monetary policy direction to curb inflation and slowing exports.
The highlight of the Fetco ICI survey in March is the confidence of retail and proprietary investors being in the neutral zone.
Institutional investors' confidence is in the bullish zone while that of foreign investors is in the bearish zone.
The most attractive sector is tourism and leisure, while the least attractive sector to investors is banking.
The most influential factor driving the Thai stock market is the general election and the most important factor impeding the local stock market is worries over fund outflows.
During the first half of March, the SET Index fluctuated. Later, it was weakened in the wake of US and European banking crisis, triggered by the abrupt collapse of the Silicon Valley Bank, which played an important role in offering financing solutions for startups, followed by the fallout of Credit Suisse, which saw UBS come to rescue. The matter rattled the global banking sector.
In addition, worries over the Fed hiking its policy rate to curb inflation also undermined confidence.
However, in the latter half of March, the SET Index pared some losses on the easing banking crisis and the Fed slowing the pace of its hike with 25 basis points.
In March, the Bank of Thailand's Monetary Policy Committee raised its policy rate by 25 basis points. The local political situation is getting more focus as the election day has been set by the Election Commission.
At month-end, the SET Index closed at 1,609.17, down 0.8% from the previous month.
Foreign investors were net sellers of 31.4 billion baht for the month with total net selling of 56 billion baht for the quarter.
For external factors, investors were cautious in case the easing of the banking crisis in the US and Europe is short-lived. Movements of key global central banks, including the US, Europe and the UK, using their policy rates to tame inflation remain on the radar. The Russia-Ukraine conflict is also a concern.
"Locally, eyes are on the pre-election political situation and export contraction as a result of the slowing economies of trading partners," Mr Kobsak said.
