The brokerage is particularly upbeat on India, which it feels will benefit from easier external conditions and macro-financial policies positioned for sustainable growth.
EM fund managers' positions on India are at a five-year low, it said
India and Brazil, two of the brokerages key overweights going into 2019, still look under-owned compared to their historical ranges, it said in a note.
“Our economist Upasana Chachra maintains a constructive stance on India's macro outlook as policy decisions remain supportive of improving the productivity dynamic, with no evident signs of misallocation in the form of higher inflation or deficits,” the foreign brokerage said.
The key anchor for the macro outlook is the governments policy action to improve the productivity dynamic (trend in fiscal policy, stance on real rates and trend in labour markets), which has been moving in the right direction, it said.
The key risks it said stem from external factors such as higher oil prices, a stronger US dollar and consequent tightening in financial conditions.
While the brokerage did not give any target for Indian indices, it felt that India is seeing a nascent recovery in capex spending.
India, it said, is among countries such as China and South Africa, with a stronger bias for growth. This is in contrast to countries such as Korea, Australia and Singapore will value bias.