Asia Economy

India tops China as most attractive investment destination

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India has overtaken China as the most attractive investment destination, according to Ernst & Young (EY), with the sharp depreciation in the rupee and opening up of new sectors to foreign players boosting the South Asian nation's allure.

Companies are most likely to invest in India, followed by Brazil (2), China (3), Canada (4) and the United States (5), EY's ninth bi-annual Capital Confidence Barometer - a survey of 1,600 senior executives across more than 70 countries - showed. In the eight edition of the survey, published in May, China had the top spot, followed by India and Brazil.

"The investor outlook for India remains positive, despite the challenges the country's economy has faced in the recent past," said Amit Khandelwal, national leader & partner, Transaction Advisory Services at EY.

(Read more: China's early-bird investors are left holding the worm)

"At the same time, the improved condition of the world economy has helped increase confidence amongst deal makers, prompting them to take a bolder stance toward executing transactions...the Fed's [Federal Reserve] reassurance on not pulling back stimulus in the near term has boosted confidence in the board rooms," Khandelwal said.

Over the past year, India has ramped up efforts to attract overseas capital, relaxing foreign direct investment (FDI) across several industries including telecoms, single brand retail and oil and gas.

In addition, with macroeconomic pressures and large debt piles, several Indian companies are looking to divest their non-core businesses, creating a large opportunity for foreign investors striving for a greater role in the Indian market.

(Read more: Is Chinaturning on foreign companies?)

India versus China: Where should you invest?

Sectors with the highest level of anticipated deal-making include automotive, technology, and consumer products, the firm said.

Global M&A outlook bright

Global executives have become more upbeat with regard to plans for deal-making underpinned by growing confidence in the global economy, with 35 percent planning acquisitions up from 25 percent a year ago.

"M&A [merger and acquisition] sentiments are being buoyed by a much more positive view of deal fundamentals - there have been notable increases in the number and quality of acquisition opportunities, as well as a significant improvement in the likelihood of successfully closing deals," Pip McCrostie, global vice-chair, Transaction Advisory Services at EY, added.

(Read more: Wal-Martcozies up to China as it shelves India)

Executives who expressed the intent to engage in "momentum-creating" deals ($501 million to $1 billion range) more than doubled from six months ago.

While, those focused on smaller transactions (below $51 million) fell to just 27 percent, from almost 38 percent 12 months ago, with greater confidence fueling an appetite to do larger deals.

—By CNBC's Ansuya Harjani; Follow her on Twitter:@Ansuya_H