India appears to be the biggest loser on account of global fund managers shifting their focus back to developed markets from emerging economies, with the country emerging as the least preferred investment destination in the Asia-Pacific region in a new survey.
According to a February survey of fund managers by financial services major Bank of America Merrill Lynch, rising risk levels in emerging markets and the recovery of the global market is prompting investors to shift their investments to developed markets.
Of the 188 fund managers surveyed, only a net 5% of fund managers are now 'overweight' on emerging markets, down from a net 43% in January, the lowest level since March, 2009, and the largest one-month fall on record.
Overweight refers to a recommendation for investors to increase their investment position in a particular market.
In contrast, investors now report more positive stances on key developed markets. Appetite for eurozone equities has increased significantly, with a net 11% overweight in February, compared to a net 9% underweight in January.
Further, a net 34% of the respondents were overweight on US equities, up from a net 27% in January and 16% in December.
"Unusually, higher risk appetite has been accompanied by a dramatic downsizing in asset allocation to emerging markets, as surging global growth expectations have increased the value attractions of developed market alternatives," BofA Merrill Lynch Global Research Head (European Equities strategy) Gary Baker said.
In the Asia-Pacific region, India was the least favoured market as per the survey, with 20%% of fund managers now underweight on the country, followed by Indonesia (17%) and Australia (13%).
According to market analysts, macro-economic conditions and the negative political sentiments in the country are not in favour of the Indian equity market.
They believe that high inflation and a surge in crude prices, coupled with a series of corruption scams like 2G, are the primary reasons behind the increased negative sentiment about the country.
The BofA Merrill Lynch survey also indicated that investors are bullish on stocks like tech and energy in the Asia Pacific region, while the utilities and healthcare sectors were the least preferred stocks among investors.