India has emerged as the least-favoured equity market among emerging market investors in August, according to Bank of America Merrill Lynch, in a fund manager survey.

In contrast, China, which is often mentioned in the same breath as India in terms of economic growth, is moved up as the third most-preferred markets for fund managers in this region from the fourth place, the survey said.

The survey did not say why India is the least-fancied among emerging markets, but it attributed China's preference to improving growth outlook.

This ranking comes when investment banks, including Citigroup and Goldman Sachs, recently rated India's equities a 'buy'.

"India will also likely lag any sharp global bounceback, given the recent performance and the domestic nature of its economy. But we would rather buy the market than wait and worry about it," said Citigroup in its recent strategy note.

Foreign investors have net sold Indian shares worth Rs 6,500 crore so far in August after buying to the tune of Rs 8,000 crore in July.

Concern over a sharp slowdown in India's economic growth, led by higher interest rates and unrelenting inflation, has spooked investors. Indian companies are already facing a squeeze in profits because of rising borrowing costs.

"This high level of inflation has also been taking a political toll on government decision-making and has impacted investment confidence and appetite (as interest rates have risen), and has expectedly weighed on the market," Citigroup said.