Global investors raise exposure to India in Feb

BofAML survey shows fund managers turn overweight on Indian stocks

Global investors have raised exposure to Indian equities in February from the previous month, a survey by Bank of America Merrill Lynch (BofA-ML) showed.

Fund managers turned overweight on India after being underweight in January, amid expectations the government might announce more measures to repair its finances and boost investments in the economy in the Union Budget later this month.

Emerging markets (EM) remained the most favoured region among the global survey of 194 respondents, followed by the euro area and US equities. Exposure of global investors to EM equities have been rising in the last five months

“Although global asset allocators continue to raise their holdings of EM equities (a net 43 per cent report overweight positions), EM has underperformed DM (developed markets) since late December. A net 38 per cent of fund managers think EM currencies are undervalued,” the BofA-ML survey said.

Chinese equities became the favourites among emerging market fund managers, whose ‘overweight’ allocations to the country’s stocks rose to 50 per cent — the highest since February 2012.

“Fund managers continue to believe both Chinese and global growth will improve over the next year. And, for the past 22 weeks (since early September 2012), Chinese equity funds have experienced inflows,” the survey said.

Optimism toward Japanese stocks increased to seven per cent overweight, the highest since the start of 2011.

Expectations for global growth and profits surged to the highest levels in 24 months, according to the survey. Even so, investors increased their holdings in so-called defensive pharmaceutical and consumer staples companies. They reduced their allocation in energy and materials and cut their holdings in technology companies to the lowest level since 2009.

Investors are most optimistic on banks since the top of the bull market in 2007, bolstered by record low interest rates and an improving outlook for global growth and profits, a Bank of America Corp, survey showed.

A net six per cent of global fund managers, who together oversee about $555 billion, said they were overweight banks, the highest since February 2007.