Fund managers optimistic on emerging markets, underweight on India

Despite the sharp rise in Indian equity markets, global fund managers continue to remain underweight on India.

A recent survey conducted by Bank of America Merill Lynch, found out that India is the second least preferred destination for foreign funds.

Allocation to both India and South Korea fell by 10 percent for the month of March 2012 as compared to February 2012. Australia saw the maximum drop in allocation at 13 percent.

Allocation to both India and South Korea fell by 10 percent for the month of March 2012 as compared to February 2012.

The fund manager survey however, points out the high optimism in Emerging Market (EM) economies. Though outlook for China has weakened it still gets the maximum allocation followed by Brazil and Russia.

Though EMs under performed Developing Markets (DM) over the past one month, fund managers have maintained their holding in EMs.

Risk and Liquidity Index is at the highest level since May 2011, however, funds continue to maintain high levels of cash. Average cash levels by funds as a percentage of their assets are at 4.2 percent, well above the 3.5 percent level which indicates that the market is over owned.

World markets have risen by 28 percent from their October lows, however, such high level of cash signals a cautious approach of most of the fund managers.

Source : BofA Merril Lynch Fund Manager Survey

Among the other findings of the survey is that higher percentage of fund managers now expect the global economy to strengthen over the next 12 months. This will be at a cost of higher inflation as a larger population of asset allocator's believe it to rise given the rising oil prices.

Net exposure to equity rose to 39 percent in March 2012, compared to 34 percent in February 2012. Fund managers are betting on equities and commodities and reducing their position in bonds.

Apart from Emerging Markets, fund managers are placing their bets in US and continue to be bearish in Europe.

Updated Date: Dec 20, 2014 07:09 AM

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