‘The ebbing Investment Confidence Index showed no signs of revival in the current quarter and remained almost flat between July 2011 and December 2011:’ JP Morgan Survey

JPMorgan Asset Management India Pvt. Ltd., in association with ValueNotes, has announced the findings of the ninth survey of the Investment Confidence Index (ICI) in India. ICI captures the confidence of the retail and corporate investor sector, as well as, financial advisors on the Indian economic and investment environment.

The ebbing Investment Confidence Index (125) showed no signs of revival in the current quarter and remained almost flat between July 2011 and December 2011. After witnessing a series of highs and lows over five quarters, the ICI has declined continuously over the past year.

Although the overall investment sentiment currently appears subdued, the optimism about global and Indian economic growth is improving marginally. Most interestingly, corporate, advisors and HNIs (high net worth individuals) are now more optimistic than they were in July 2011, even as the mass of retail investors have become more pessimistic.

The survey findings indicate that retail investor confidence has faded in the last few months. Investor confidence (132) faltered 28 points since September 2010 (160) reaching its all time low. India Inc. (115) and the advisor community (127) are marginally more optimistic compared to their July 2011 lows. Among the three advisor categories, bank confidence (133) recovered by 18 points from July 2011, while IFA confidence (119) plummeted 17 points to touch its lowest.

Retail investors in Hyderabad (152) are relatively more upbeat than their counterparts across other seven cities. Ahmedabad investors (110) were the least optimistic. Majority of retail investors in Pune and Mumbai expect the Sensex to rebound from its current level and trade above 18,000 in June 2012.

Indian investors and advisors appear unaffected by the recent volatility in stock markets. 48% of retail investors and 76% of advisors expect the benchmark Index to trade between 17,000 and 20,000 in June 2012. Confidence within young investors (age 22-25 years) has witnessed a 36 - point fall since last year. Inflation and global uncertainty have been voted as the two most negative economic indicators. However, inflation concerns have dropped significantly among corporates and advisors, possibly because of reports about stabilisation of inflation rates.

Retail investment activity in mutual funds has picked up 9% from last quarter to reach 70%, while in stocks it fell 6%. With falling markets, risk-averse investors show lesser preference for stocks (from 70% to 56%) but increased preference for mutual funds (from 44% to 68%) since March 2011.

Rising gold prices appear to have affected investment activity in gold. As a result, percentage of investors investing in this asset class has fallen 19% since December 2010.

The investment sentiment of investors, with smaller wallet sizes (Rs2 to 5 lakhs), fell the most, while it has improved among HNIs. IFAs (Independent Financial Advisors) in Mumbai (106) continue to be the most sceptical, while Delhi/NCR
IFAs (139) are the most confident.