The US subprime crisis may have spilled over to the worldwide equity markets, but all is not lost for India with a new survey of fund managers from across the world indicating a major shift towards emerging markets. 

While fund managers have turned more risk averse in light of the global market instability, they believe equities still offer value, especially relative to bonds, according to Merrill Lynch’s fund managers survey for August. 

The survey indicated a shift away from the US with 29 per cent of respondents saying emerging markets offered best corporate profit outlook of all regions, overtaking Eurozone-favoured region throughout 2007.

Equity market

Although the survey did not specifically mention India, the country is one of the main emerging economies globally. The country’s stock market benchmark Sensex, however, has fallen in line with the global trend in the past few days. 

Merrill Lynch said investors believed that quality of earnings in emerging markets, while a concern, was improving although it was deteriorating in the US. Besides, the managers said that valuations were seen as more attractive and fewer respondents believed emerging market equities to be the most overvalued.

In the broadest snapshot of global institutional investor sentiment since sharp rises in credit spreads and equity market volatility, 11 per cent still regarded equities as undervalued, while 41 pc thought bonds are overvalued.

Noting that emerging markets are riding out the US turmoil, Merrill Lynch said fund managers consider the wider credit spreads as a problem centred in the US housing market.