Fergie believes United's neighbours is a threat in the race for the title, following their massive spending this summer.
"City have to be in the top four," said Fergie. "They've spent that money, the expectation increases with that, and they will be challengers, there's no doubt about that. You have to expect that.
"Mancini has settled into the job and he'll know the strength of the players from last year. He's added David Silva, Yaya Toure, Jerome Boateng, Aleksandar Kolarov and more to come with Balotelli and Milner.
"So they've got to be in the pecking order. Last season they had a new team as well and got off to a decent start because they have individuals who can win games. So they won't be looking at a bad start as a possibility."