Investors still bullish on India, but sentiment weakens

India is expected to outperform emerging markets in 2016, although there is a considerable weakening of conviction among investors regarding the country compared with the second half of last year, according to a survey by Morgan Stanley.

Fifty-two per cent of the respondents in the survey said they expected India to outperform emerging markets this year, against 85 per cent respondents in the previous survey conducted in the second half of 2015.

Concerns over the health of the global economy have triggered a risk-averse sentiment among global investors, who had withdrawn money from riskier assets including India and moved to gold and developed world bonds.

But the survey conducted by the American financial services firm showed that a majority of foreign investors continue to have confidence in India's growth story. The Sensex has gone up 10 per cent since the Budget for 2016-17 was presented on 29 February.

Foreign investors have pumped in nearly Rs13,000 crore into Indian equities after withdrawing nearly Rs26,200 crore in the first two months of the year. For the third time in a row, market participants view earnings growth as a key driver of market performance while all other factors have lost importance.