No place for India on global high Streets

A DAY after a new report by Morgan Stanley said India was poised to emerge as the fastest-growing economy by 2012-13, the country does not figure among the most favoured destinations for buying stocks in the eyes of global fund managers, reinforcing the widely-held belief that the local markets are among the most expensive in the world.
    According to the BoA Merrill Lynch survey of 187 global fund managers in August, Russia and Turkey are the most favoured markets for a large number of fund managers who invest in emerging markets across the world. Interestingly, India—perceived to be among the most expensive markets globally—barely finds a mention in the report. So much so that fund managers eyeing Asia-Pacific are underweight on India, though they have reduced their bearish view slightly in August.
    These fund managers are 'overweight' on these two markets by a wide margin. Brazil, Indonesia, Thailand and Mexico are their other favourites. Indian is only marginally 'overweight' on this list. Taiwan, Malaysia and China, which has overtaken Japan as the second-largest economy in the world, figure in the list of 'underweights'. Analyst estimates for the earnings per share of the BSE 30-share Sensex in the current financial year range between 950-1,050.
REALITY BITES
The Overweights
Russia, Turkey, Brazil, Indonesia, Thailand and Mexico. India is only marginally overweight.
The Underweights
Taiwan, Malaysia and China
The Least Favourite
Australia remains the least favoured market in the region. Less bearish on global scene
This translates into a forward price earning multiple of 17-19 times, which market participants say is slightly on the higher side compared to historic valuations. And while most of the mid-cap stocks in India have done well, the benchmark indices have been stuck in a narrow range for the past six months.
    "China is still the most favoured market for Asia-Pac investors. Hong Kong and Korea have been raised to overweight, whilst positions in Taiwan have been cut to neutral. Australia remains the least favoured markets in the region," the survey said.
    At the broader level, fund managers' outlook on the emerging markets has improved this month, largely due to a more positive view on the Chinese economy. A net 38% of the respondents are overweight on the region, up from 34% in July. But this is way off the 53% overweight seen in November last year, the survey said.
    "A net 39% of EM (emerging market) investors believe global liquidity and domestic demand will be the most important drivers of EM equity prices. The recent run of weak US economic data has also affected their views: a net 78% think US demand will be the least important driver, up from 40% last month and one of the worst readings since April '09," the survey said.
    Overall, fund managers are less bearish on the global economy now than they were in June and July. However, they remain cautious on global growth and risk.
    "A mere 5% of investors forecast stronger global growth in the next 12 months, but a large 78% majority do not expect another recession," the survey said. In July, 12% of the fund managers had said they expected the global economy to deteriorate.
    Among other findings of the survey, there has been a sharp drop in investors' appetite for US and Japanese equities, but a recovery in demand for euro-zone equities.