BofA-ML says, India most favoured among emerging market equities

India is the most favoured market for global investors among emerging market equities, followed by China, a Bank of America-Merrill Lynch (BofA-ML) report says.

According to a survey of fund managers by the global financial major, India and China are the most favoured among emerging market equities, while Australia, Indonesia and Malaysia are "unloved".

"Based on our Asia Pacific ex-Japan investor panelists, India moved back to being the market most investors would overweight in October, followed by China, while investors scaled back on their Korea overweight views," the report said.

Among other emerging markets, sentiments for Taiwan reduced, while Indonesia went from an 'overweight' position to being one of the most unfavoured markets.

The BSE's benchmark Sensex is currently hovering around 26,700 points and has gained over 600 points so far this month. Overseas investors have turned net buyers in October so far and have pumped in over Rs 8,000 crore.

According to BofA-ML, views on the Chinese economy, to a large extent, define investor views on emerging market equities.

While most of the survey respondents believe Chinese economy will see some improvement in the next 12 months and are also less bearish on China's growth prospects, investors do not want exposure to emerging markets, it said.

Almost half of the respondents believe that Federal Reserve will raise interest rates in December 2015 while about 36 per cent see a rate hike in the first quarter of 2016.

"Investors now see government bonds as being the most vulnerable asset class when the Fed raises rates, followed by stocks, while commodities are being seen as the least vulnerable," the survey noted.

The survey period was October 2-8 and 209 participants with USD 512 billion assets under management responded to the survey.