Emerging market investors turned more bearish on Indian shares in May as compared with a month before, according to a Bank of America Merrill Lynch (BofA ML) survey of fund managers.
Emerging market fund managers increased their underweight rating on India to over 55 per cent in May from around 20 per cent in April, says the survey. The survey, of emerging markets and Asia fund managers took place from May 4 to 10, after elections in France and Greece. A total of 125 managers, managing $270 billion, participated in the survey.
“Global liquidity may be abundant, but fund managers are taking lower-than-normal risk in their portfolios in response to softer global economic data and elevated threats from Europe,” said Kate Moore, senior global equity strategist at BofA ML. “Emerging market-dedicated investors appear more cautious. They trimmed their sector and country allocations across the board in May.”
The Bombay Stock Exchange (BSE) benchmark, Sensex, has lost 6.4 per cent in this month so far. The 30-stock index closed 4.48 points lower at 16,217.82 today.
Foreign institutional investors, which had pumped Rs 43,383 crore in Indian shares in this calendar year till April, have withdrawn Rs 927 crore in this month till May 23, showed Securities and Exchange Board of India (Sebi) data compiled by the BS Research Bureau.
Emerging market investors scaled back their overweight on Chinese equities to 29 per cent in May, the lowest since October 11. They turned 14 per cent underweight on Brazil, the first time since February 2011.
A growing majority of global investors would like to see more stimulative fiscal policies from governments around the world, amid resurgent fears about the Greek economy, according to the survey.
“Investors have eradicated hopes of growth and inflation that had built up in the early months of the year and they are looking to policy makers for stimulus,” said Gary Baker, head of European equities strategy at BofA ML Global Research.
The proportion of global investors saying global fiscal policy was “too restrictive” more than doubled to a net 23 per cent from a net 11 per cent in April, BofA ML said. A total of 173 managers, managing $526 billion, participated in the global survey.
Nearly two-thirds of investors are concerned that Greece would be the source of a negative surprise this year, up sharply from 48 per cent in April, the survey showed.
Appetite for commodities has fallen to its lowest level in seven months, the survey found. A net two per cent of the panel is now underweight on commodities, compared with a net eight per cent overweight on the asset class in April.