4th wave of Investment Confidence Index by J.P. Morgan Asset Management in association with ValueNotes

• Greater China seen as the most attractive international investment destination
• Ahmedabad investors top confidence
• Ahmedabad and Delhi very bullish about Sensex movement

JPMorgan Asset Management India Pvt. Ltd. (JPMAMIPL) in association with ValueNotes today announced findings of the fourth wave of the Investment Confidence Index (ICI) in India. The J.P. Morgan Asset Management – ValueNotes Investment Confidence Index (ICI), which was launched in August 2009, is published on a quarterly basis. The ICI captures the confidence of retail investors, corporate investors and financial advisors on the Indian economic and investment environment.

In this quarter’s findings, the Retail Investor Confidence Index ranks the highest at 151.7, followed distantly by Advisor Confidence Index (135.4) and Corporate Confidence Index (134). The ICI stands at 140.4 in June 2010, indicating a 4.5-point or 3.3% increase over the ICI a year ago in July 2009. The findings also indicate that Inflation has been the single biggest confidence killer in the Indian economy over the last two quarters. This quarter the Eurozone debt crisis also appears to have dented confidence to some extent.

 

ValueNotes, an independent market research company, was commissioned by J.P. Morgan Asset Management to conduct the survey. The ICI was developed by interviewing a random sample of retail investors (with a wallet size in excess of INR 200,000), corporate investors and financial advisors. The survey took place in June 2010 in eight cities across India: Mumbai, Delhi/NCR, Kolkata, Chennai, Ahmedabad, Bengaluru, Pune and Hyderabad.

The key objective of the ICI is to quantify confidence in the investment environment among investors and advisors. The survey also attempts to study investment behaviour and sentiment based on key factors such as the improvement in the Indian and global economic environment, general investment atmosphere, expectation of growth in investment portfolios and others. Additionally, ICI analyses the short term and long term changes in investment behaviour and outlook every quarter, from an investor and advisor standpoint.

The J.P. Morgan Asset Management – Valuenotes Investment Confidence Index score is derived from responses to the following questions posed to all target segments:

1. The likelihood of the Indian economic situation improving from current levels in the next six months.
2. The likelihood of an improvement in the general investment market environment and atmosphere from current levels in the coming six months.
3. The possibility of the global economic environment improving from current levels in the coming six months.
4. The likelihood of the BSE Sensex increasing in the next six months.
5. The prospect of your / your clients’ investment portfolio appreciating in the coming six months.
6. Expected increase or decrease in the amount of investment and/or increase in mutual fund inflows in the coming six months.

Responses to these 6 questions also form the basis for arriving at the Retail Investor Confidence Index, Corporate Confidence Index and the Advisor Confidence Index which are sub-indices of the Investment Confidence Index. At any given point, the indices can move from ‘0’ to ‘200’, with ‘0’ depicting the most negative outlook; ‘200’ depicting full and absolute confidence and ‘100’ showing a neutral position.

Mr. Christopher Spelman, Whole time Director and Chief Executive Officer of J.P. Morgan Asset Management said, “The Indian investor community continues to maintain its optimism about investment inflows. Though the ICI has seen some volatility in the last couple of quarters, the current levels suggest an overall confidence in the long term resilience of the Indian economy. Domestic inflation and global uncertainties have emerged as a concern for the respondents but this has been overshadowed by the projected GDP growth which has been voted as the most positive indicator.”

Mr. Arun Jethmalani, Managing Director, ValueNotes commented, "Looking beyond the 4.5-point increase in the ICI since its inception last year, we note significant divergence in outlook and sentiment within the financial community. Of the three underlying Indices, retail confidence increased consistently every quarter, corporate confidence remained fairly flat and advisor sentiment declined. However, strong consensus prevails on three indicators led by the resounding faith in the Indian economy. Inflation is killing confidence and concerns on the global economy persist, with the drama shifting from the US-led crisis to the current Eurozone debt crisis."

Key findings:

• Retail investor confidence continues to be buoyant increasing successively every quarter to stand at 151.7, an increase of 13.4 points since July 2009.
• A significant trend noticed over the last four quarters suggests that the Indian investor is getting increasingly conscious of monetary and fiscal policy developments. The retail investors’ vote for RBI’s monetary measures as a positive economic indicator has been gradually increasing over the last four quarters: 9% in July 2009, 17% in September 2009, 21% in February 2010 and 31% in June 2010.
• Concern over inflation is back to September 2009 levels for corporate and retail investors after a spike in February 2010 but continues to be the most negative economic indicator for the financial community. In the Fourth Wave, 48% corporate investors consider it the biggest negative in the current context, followed by advisors (40%) and retail investors (35%). Eurozone debt crisis is the second biggest worry this time around among advisors and corporates, while among retail investors high fiscal deficit is a cause for concern.
• Among advisors, IFA confidence is the highest (139.7) for the first time since the launch of the survey in July 2009. N/RDs have recorded the lowest confidence at 127, declining 16 points from the previous quarter.
• Ahmedabad retail investors have surged ahead and taken over the pole position from Chennai for the first time since July 2009. Ahmedabad’s retail investor confidence records an all time high at 177, a 40-point rise over the year. It is the highest ever confidence level recorded among retail investors and IFAs from the eight key cities that are surveyed. Chennai IFAs (146) however continued to remain the most confident in June 2010 as well.
• Hyderabad continues its status as the least confident city, but appears to be improving, given the 23-point increase in its Retail Confidence Index since July 2009.
• Retail investors working in the BFSI sector continue to rank the highest (158) in confidence, recording a 17-point increase since July 2009.
• Older investors are turning bolder. In the current wave, retail investors in the 50-55 years age bracket exude the highest confidence (160.3) among all age groups, witnessing a 26-point rise since July 2009.
• The survey results suggest that, there could be a slew of capital investments from the larger corporates over the next 6-12 months. A clear majority of corporate investors (63%) indicated that they will make additional capital investments in the next 6-12 months.
• Advisor sentiment on an increase in the BSE Sensex is significantly higher than the retail outlook. 86% of advisors and 74% retail investors indicated that the Sensex would be trading at higher levels in December 2010. Interestingly, opinion among advisors (43%) and investors (23%) is alike for the BSE Sensex to trade in the range of 18,000-19,000.
• In September 2009, 34% investors and 22% advisors expected the BSE Sensex to trade at 18,000-19,000 levels in March 2010. However, both investors and advisors were a bit more optimistic as the Sensex traded between 17,000 and 18, 000.
• In June 2010, only 38% of retail investors showed an interest in investing in international markets but advisors were much more upbeat with 90% expecting high investor interest in international markets.
• Among advisors (37%), Greater China is perceived as the most attractive international investment destination, while among retail investors (17%), it is the USA.