The quarterly survey across eight cities finds fall in confidence caused by poor global outlook, high domestic interest rates and inflationary concerns. Still, investors expect Sensex to climb to over 20,000 by year end
The Indian Investment Confidence Index (ICI) is at its lowest in two years, due to the combined impact of the global economic slowdown, high domestic interest rates and inflationary concerns, according to a survey conducted by JP Morgan Asset Management across eight cities in July. However, a majority of investors and advisors in India expect the benchmark Sensex to trade between 20,000 and 22,000 by the end of this year.
Interestingly, the retail confidence index although 4.2 points down from the previous quarter, ranked the highest (137.5). The advisor confidence index was a distant second (124.9), whereas corporate confidence was at the lowest (109).
Christopher Spelman, whole-time director and chief executive officer of JP Morgan Asset Management says, "ICI for the current wave has been impacted by a significant fall in the outlook on the global economy, domestic interest rate hikes and inflationary concerns. Despite this negative news flow, the Indian financial fraternity maintains a positive outlook with a majority of investors and advisors expecting the benchmark index to trade between 20,000 and 22,000 by the end of this year. Another interesting finding is that young investors (age 22 to 25 years) appear highly enthusiastic about investing in mutual funds."
ICI, which was launched in August 2009, captures the confidence of retail and corporate investors, and financial advisors on the Indian economic and investment environment on a quarterly basis.
The numbers were calculated on the basis of responses received from 1,623 respondents (retail), 50 corporate treasuries, 269 independent financial advisers (IFAs), 20 banks and 20 national/regional distributors (N/RDs).
Banking and financial services emerged as the most attractive sector for investment among retail investors and advisors. Investors appear to have turned cautious as preserving capital emerged as a popular strategy among 40% of retail investors surveyed. Further, just 40% of investors were likely to turn "somewhat aggressive" about their investment strategy in the coming six months, as compared with 57% in the previous quarter.
In corporate treasuries investment activity showed noticeable decline across all instruments. Money market mutual funds remained the most popular debt instrument. It is interesting to note that 50% of corporate treasuries expect to maintain the current investment level in liquid funds ahead of the Reserve Bank of India's regulation on limiting banks' exposure in liquid funds to 10% (effective from January 2012).
The survey found that IFAs (independent financial advisors) in Mumbai are a despondent lot and their confidence is the lowest this quarter. Easy to understand when one finds that personal networking continues to be the most preferred source of information for investment decision making among retail investors.
Arun Jethmalani, managing director of ValueNotes, the independent market research agency of JP Morgan that conducted the survey, says, "Growing vulnerability of the global economy and uncertainty in the domestic investment environment have taken a toll on investment confidence, dragging the ICI down to its lowest ever. Interestingly, confidence within India Inc. appears to be shaken the most, amidst rising inflationary pressure, poor governance and corruption; even as the advisor community is a little more optimistic about financial investments."
Market gains on lowest volume on the past nine days
Gains in late trading, together with a positive mood in the US and European markets, helped the domestic market close in the green for a second consecutive day. Investors will now focus on the Reserve Bank of India’s (RBI) mid-quarter policy review announcement, scheduled tomorrow.
As we suggested yesterday, the Nifty almost touched 5,070, starting at 5,062 at the opening bell today. However, the indices turned negative within the first hour and dropped to their intra-day lows. At the day’s lows, the Nifty touched 4,967 and the Sensex was at 16,545.
Weak recovery attempts were thwarted by sellers, which kept the market in the red till noon. But a firm opening on the European markets boosted investor sentiments and pushed the indices higher in subsequent trade.
Yesterday, French and German leaders reiterated their intentions to help Greece, stating that the debt-stricken country would remain a part of the European Union. This helped change sentiment overnight.
Buying in select stocks helped the indices inch higher as trade progressed. The market once again hit its intra-day high in the closing minutes of trade. At the day’s high the Nifty touched 5,091 and the Sensex rose to 16,922. The indices closed slightly off those levels, but up for a second day in a row. Finally, the Nifty ended the day at 5,076, up 63 points, and the Sensex gained 167 points to 16,877. The NSE witnessed its lowest volume in the past nine days at 56.80 crore shares
The Nifty should stay above 5,065 and restrain from making an intra-day low below 4,967. From here, there may be a volatile move to 5,160. However, if the Nifty falls below 4,967 the index may slide to 4,865.
The advance-decline ratio on the NSE was 955:689.
The broader indices were slower in catching up with the Sensex today. The BSE Mid-cap index gained 0.55% and the BSE Small-cap index rose 0.26%.
Barring BSE Capital Goods index (down 0.67%) and BSE Fast Moving Consumer Goods index (down 0.32%), all other sectoral gauges settled higher. The top gainers were BSE Realty (up 3.25%), BSE IT (up 2.10%), BSE TECk (up 1.89%), BSE Bankex (up 1.82%) and BSE Auto (up 1.65%).
Tata Motors (up 6.04%), DLF (up 4.02%), State Bank of India (up 3.64%), HDFC (up 2.61%) and Sterlite Industries (up 2.33%) were the leaders on the Sensex. The top losers were Larsen & Toubro (down 1.21%), BHEL (down 1%), Hindustan Unilever, Maruti Suzuki (down 0.94% each) and Tata Steel (down 0.79%).
The top performers on the Nifty were Tata Motors (up 5.68%), GAIL (up 4.62%), DLF (up 4.60%), SBI (up 4.13%) and Sterlite (up 3.87%). The top losers were BHEL (down 1.28%), L&T (down 1.16%), Tata Steel (down 1%), HUL (down 0.74%) and Tata Power (down 0.67%).
Asian markets settled mostly higher as statements by France and Germany to help Greece, eased worries over the debt-stricken country defaulting on its debt. Also, US and European leaders are expected to meet on Friday, to discuss ways to diffuse the tension that has led to a slowdown in economies the world over.
The Hang Seng gained 0.71%, the Nikkei 225 climbed 1.76%, the Straits Times rose 0.97%, the Seoul Composite surged 1.42% and the Taiwan Weighted jumped 2.17%. On the other hand, the Shanghai Composite lost 0.23%, the Jakarta Composite declined 0.65% and the KLSE Composite fell by 0.46%.
Back home, institutional investors—both foreign and domestic—were net sellers in the equities segment on Wednesday. While foreign institutional investors offloaded stocks worth Rs45.82 crore, domestic institutional investors pulled out funds amounting to Rs182.68 crore.
Navneet Publications has forayed into school management services by investing Rs45 crore in Sequoia Capital-backed K-12 Techno Services Pvt Ltd. The latter is a Hyderabad-based school management company serving around 67 state board schools in Andhra Pradesh. K-12 also manages eight junior colleges and an international school. Navneet closed at Rs67.10, up 1.51% on the NSE.
Jyoti Structures has entered into a joint venture with US-based Lauren Engineers and Constructors in a bid to expand its presence in the EPC (engineering, procurement and construction) business, focused on power generation and oil & gas sectors. Jyoti Structures ended 1.08% higher at Rs70.
Alfa Laval, which makes heat transfer, centrifugal separation and fluid handling equipment, has secured an order for a process solution for an infant food manufacturing plant valued at Rs73.7 crore. The order consists of a complete baby food processing line and is scheduled for completion in 2013. The stock jumped 4.44% to close at Rs1,930.
"Inflation in certain commodities like onion and potato are still a concern... The steps that we have taken will have some moderating influence but it is taking time and it will continue to... for some time," finance minister Pranab Mukherjee commented after food inflation fell to 9.47% for the week ended 3rd September
New Delhi: Onion prices have gone up 43% in a year and potato is costing over 20% more, but the government has said it will take 'some time' before prices of the kitchen staples decline, reports PTI.
Onions were dearer by 43% on an annual basis, while potato prices were up 21%, as per food inflation data for the week ended 3rd September released today.
"Inflation in certain commodities like onion and potato are still a concern... The steps that we have taken will have some moderating influence but it is taking time and it will continue to... for some time," finance minister Pranab Mukherjee told reporters here.
His comments came after food inflation fell to 9.47% for the week ended 3rd September, even as prices of all items, barring pulses and wheat, went up on an annual basis.
Food inflation, as measured on the basis of the Wholesale Price Index (WPI), was 9.55% in the previous week.
Onion prices are between Rs10.75 and Rs12.80 per kilo in wholesale markets in the capital, while their retail prices are currently at Rs20-Rs25 a kg.
Wholesale potato prices in Delhi NCR are Rs8.50-Rs15 per kilo, while retail price of the item is Rs15-Rs20 per kg.
"There has been some softening in the wholesale prices but... we should not read too much between the weekly fluctuation," Mr Mukherjee said.
He said global price pressure is also to blame for high domestic inflation. Headline inflation jumped to a 13-month high of 9.78% in August.
"The international situation is still volatile, though the cues from both US and Europe are that there will be softening trend of the prices," Mr Mukherjee said.