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Bank of America-Merrill Lynch said on Tuesday said that India saw one of the biggest global mutual fund investors’ exodus in the past one month till date. It happened at a time when a net 19 per cent of global investors had gone underweight on emerging markets.
In its ‘EM and Asia Fund Manager Survey’, BofA-ML, however, said the bearishness towards emerging markets “could soon be turning the corner — investor sentiment on Chinese growth and materials stocks ticked up modestly this month.”
Equity strategists Swathi Putcha, Michael Hartnett and Brian Leung, said: “We continue to view emerging markets as one of the summer’s best contrarian trades.”
However, Dhirendra Kumar of mutual fund tracker Value Research said India-focused mutual funds have been seeing gradual exodus in the past four years. “But, the last three to four months have been severe in terms of outflow,” he added.
There are some 80 major India-oriented funds overseas; all of them had had the same trajectory, Kumar observed.
The primary reason for exodus was the falling returns after adjusting for currency valuation dip and inflation. “The trigger for contrarian trades in case of India is still not on the horizon,” Kumar felt.
BofA-ML strategists also took heart from the fact that investors had “meaningfully” raised exposures in South Korea, Brazil and Chile. Sectors, such as materials, tech and industrials, saw a notable improvement in sentiment.
“Across sectors, media, insurance and utilities improved the most, while energy, tech and autos were notably reduced (in terms of exposure),” the survey report said.
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