Following the sharp rise in India’s indices in 2012, the number of global investors who are underweight on India has dropped the net underweight position on India has dropped sharply from 33 per cent in February to six per cent in March, according to a widely followed survey of fund managers.
According to the latest survey of fund managers by Bank of America Merrill Lynch (BofA-ML), expectations of an improvement in global growth have risen sharply, dashing hopes of further quantitative easing (QE) by central banks in US and Europe. The survey goes on to add that good growth prospects in Europe, the US and Japan are overshadowing emerging markets (EM).
According to the survey, a net 28 per cent investors expect the world economy to strengthen in the next 12 months, up from net 11 per cent in February.
Improved growth prospects, however, have lessened the expectations of a QE. About 47 per cent of fund managers surveyed don’t expect any further easing from the US central bank, up from 36 per cent in February. About 39 per cent predict the European Central Bank will not extend a QE, up from 23 per cent a month ago.
Growth expectations have improved sharply. In January, a majority of fund managers surveyed said the economy would weaken.
“We are witnessing a rehabilitation of European growth prospects, boosted by a sharp fall in EU sovereign concerns,” said Gary Baker, head of European equities strategy at BofA Merrill Lynch Research.
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Fund managers foresee higher inflation with a net 13 per cent expecting it to rise in the coming year, a contraction from February when a net 16 per cent predicted inflation would fall.
“The prospect of higher inflation reflects a victory of central banks in the war against deflation,” said Michael Hartnett, chief global equity strategist at BofA Merrill Lynch.
Meanwhile, inflation concerns have risen significantly among Asia-Pacific fund managers.
A net 41 per cent expect inflation in the region to rise in the coming year.
Cash levels in the hands of fund managers, a barometer for risk appetite, in March stood at 4.2 per cent, well above 3.5 per cent, which is considered a level of over-owned risk.
According to the survey, despite the relative underperformance of emerging markets in the past one month, fund managers have continued to maintain aggressive positions towards emerging market equities at a net 40 per cent.