India losing emerging market sheen

India's position in the emerging markets league seems to be slipping. According to Emerging Portfolio Fund Research, India's ranking among the global emerging market (GEM) funds has come down from since August.

In August, India was fifth in terms of allocations which amounted to 6.14 per cent. However, in October the rank was down to seven with allocations also coming down to 5.87 per cent.
 

HOW THEY FARE
Rank	Aug	Sep	Oct
1	Korea (18.01%)	Korea (17.47%)	Korea (18.01%)
2	Taiwan (12.89%)	Brazil (12.29%)	Brazil (13.36%)
3	Brazil (11.32%)	Taiwan (12.10%)	Taiwan (11%)
4	South Africa (8.87%)	South Africa (8.96%)	South Africa (8.98%)
5	India (6.14%)	Russia (6.05%)	Russia (6.33%)
6	Mexico (5.87%)	China (6.01%)	China (5.98%)
7	China (5.84%)	India (6.00%)	India (5.87%)
8	Russia (5.28%)	Mexico (5.57%)	Mexico (5.67%)
9	Malaysia (3.15%)	Thailand (3.32%)	Thailand (3.21%)
10	Thailand (2.87%)	Malaysia (2.9%)	Turkey (2.77%)

The numbers do not come as a surprise as several broking firm have been downgrading India consistantly given the sharp run up in prices earlier this year.

Even now, India is the most expensive market in the amerging markets universe based on most valuations parameters. Currently, India commands a price-earnings ratio of 16 times based on trailing 12-month earnings.

According to EPFR, Brazil remained by far the largest GEM fund country overweight, with an average allocation heading into October of 13.36 per cent versus 10.3 per cent for the MSCI EM index. Thailand was a distant second.

Taiwan remained the largest GEM underweight (11 per cent versus 14.5 per cent for the MSCI index), followed by China and South Africa. Most fund houses have an underweight or a neutral stance on Indian equities currently.

EPFR data also said in a recent report that GEM funds were pulling money out of Asia and steering in Latin American markets or holding cash. Their weighting for Asia fell from 52.28 per cent to 50.77 per cent while Latin America's climbed from 19.65 per cent to 20.75 per cent and the cash allocation went from 2.66 per cent to 3.1 per cent.

Meanwhile, global/International equity funds reduced their exposure to the US and UK and boosted their average Japan weighting. While developed markets accounted for 77.97 per cent of the average Global equity fund portfolio.

Among emerging markets, the top 10 country allocations were South Korea (2.23 per cent), China (0.81 per cent), Brazil (0.80 per cent), Taiwan (0.71 per cent), Mexico (0.64 per cent), India (0.53 per cent), South Africa (0.35 per cent), Russia (0.25 per cent), Thailand (0.23 per cent) and Israel (0.18 per cent).