JPMVN Investment Confidence Index July 2011

8/4/2019 JPMVN Investment Confidence Index July 2011

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July 2011


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J.P. Morgan Asset Management ValueNotes Investment Confidence SurveyJuly 22 to August 4, 2011

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TABLE OF CONTENTS

1. Introduction to the Survey 32. Executive Summary 43. Key Findings - Investment Confidence 73.1 Investment Confidence Index ............................................................................................................................................................. 73.2 Retail Investor Confidence ............................................................................................................................................................... 123.3 Corporate Investor Confidence ........................................................................................................................................................ 143.4 Advisor Confidence Index ................................................................................................................................................................ 164. Investment Strategy & Activity 184.1 Investment period ............................................................................................................................................................................ 184.2 Investment return (equity) ................................................................................................................................................................ 194.3 Retail Investment activity ................................................................................................................................................................. 204.4 Retail Investors Investment Strategy ............................................................................................................................................. 224.5 Corporate Investment Activity .......................................................................................................................................................... 234.6 Effect of RBIs regulation on exposure to liquid funds....................................................................................................................... 244.7 Capital Investment Activity ............................................................................................................................................................... 255. International Investment Preference 265.1 Retail investors and Advisors International Investment Preference ............................................................................................... 265.2 Retail investors: International Investment Preference - By Liquid Assets / Wallet size ........ ....... ........ ....... ....... ........ ....... ........ ....... ... 275.3 Advisors: International Investment Preference ................................................................................................................................. 286. Major Economic Indicators 296.1 Positive economic indicators in July 2011 ........................................................................................................................................ 296.2 Positive economic indicators through the year ................................................................................................................................. 306.3 Negative economic indicators in July 2011 ....................................................................................................................................... 316.4 Negative economic indicators through the past year ........................................................................................................................ 327. BSE Sensex 337.1

BSE Sensex likely to trade between 19,000 21,000 in December 2011 ......................................................................................... 33

7.2 BSE Sensex expectation by Wallet Size Retail ............................................................................................................................. 347.3 BSE Sensex expectation by City IFA ............................................................................................................................................ 357.4 BSE Sensex: Expected vs. Actual trading level for June 2011 ......................................................................................................... 367.5 BSE Sensex expectations for June 2011: Retail Investors by City ................................................................................................... 377.6 BSE Sensex expectations for June 2011: IFAs by city ..................................................................................................................... 388. Other Findings 398.1 Comparison between increase in personal income and corporate profits ......................................................................................... 398.2 Sector preference ............................................................................................................................................................................ 398.3 Expected Retirement Age ................................................................................................................................................................ 408.4 Preferred source of information ........................................................................................................................................................ 408.5 Survey Structure .............................................................................................................................................................................. 418.6 Retail Investor Sample ..................................................................................................................................................................... 428.7 Corporate Investor Sample .............................................................................................................................................................. 458.8 Advisor Sample................................................................................................................................................................................ 468.9 Index Construction Methodology ...................................................................................................................................................... 47


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1. Introduction to the Survey

J.P. Morgan Asset Management and ValueNotes, who jointly launched the Investment Confidence Index (ICI)

in July 2009, are nowreleasing results of the Eighth Wave for July 2011. This quarterly Index reflects the Indian

investor and advisor outlook on the economic and investment environment. The J.P. Morgan Asset Management

Valuenotes Investment Confidence Index is made up of three sub-indices:

1. J.P. Morgan Asset Management ValueNotes Investor Confidence Index,

2. J.P. Morgan Asset Management ValueNotes Corporate Confidence Index and

3. J.P. Morgan Asset Management ValueNotes Advisor Confidence Index

The three indices, based on a survey of investors and advisors, reflect sentiment across the investmen

community. Investors comprise of retail and corporate investors. Advisors comprise of banks, National/Regional

Distributors (N/RDs) and independent financial advisors (IFAs).

The key objectives of the survey are to capture, across selected cities in India,

Quantify the extent of confidence that investors and advisors have on an improvement in the overal

investment environment from current levels

The outlook of investors and advisors on key factors affecting investment behaviour and sentiment

The investor appetite for investing in varied investment options, including stocks and mutual funds

The change in investment behaviour and outlook, from an investors and advisors perspective

The global and domestic cues that impact investor and advisor sentiment

The characteristic investment behaviour of key investor segments and their deviation from overall

averages

These three indices fill a vital gap in the current Indian investment scenario by providing scientific, research-driven

sentiment indicators.

The current survey towards the Eighth Wave of ICI was carried out from July 22, 2011 to August 4, 2011.


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2. Executive Summary

The J.P. Morgan Asset Management ValueNotes Investment Confidence Index (ICI) Indias only

investment sentiment indicator

Eighth Wave, July 2011

J. P. Morgan Asset Management and ValueNotes announce the results of the Eighth Wave of the ICI.

The ICI comprises of three equally weighted indices:

1) J.P. Morgan Asset Management ValueNotes Investor Confidence Index

2) J.P. Morgan Asset Management ValueNotes Corporate Confidence Index and

3) J.P. Morgan Asset Management ValueNotes Advisor Confidence Index

The advisor confidence Index is a combination of sentiment across banks, national/regional distributors (N/RDs)

and independent financial advisors (IFAs), all equally weighted. At any given point, the Index can range from 0

to 200, 0 being the most negative outlook and 200 depicting full and absolute confidence.

The indices are the result of a nation-wide survey of retail and corporate investors and advisors. The First Wave,

of the survey was carried out from July 7, 2009 to July 20, 2009. The Eighth Wave (current) of the survey wascarried out from July 22, 2011 to August 4, 2011. The survey covers eight cities in India: Delhi/NCR, Mumbai,

Kolkata, Chennai, Ahmedabad, Bengaluru, Hyderabad and Pune. The current ICI is based on interviews with

1,623 retail investors, 50 corporate treasuries and 309 advisors. Interviews were conducted either face-to-face

online or over the telephone.

All respondents were asked six key or Index questions, the answers to which were used to compute the indices

Respondents were asked their opinion with respect to expected improvement in the Indian and global economic

situation, improvement in the general investment market environment and atmosphere, expected increase in the

BSE Sensex, possibility of personal/clients investment portfolio appreciation and expected increase in

personal/clients investments over the next six months.

The Investment Confidence Index (ICI) has weakened 8.5 points from last quarter and the score hastouched its lowest (123.8) since its birth in July 2009. Investment sentiment appears affected by

prevailing macro-economic factors such as recessionary conditions across global markets, frequent

hikes in interest rates and volatility in the domestic investment environment. Sentiment across all three

categories retail investors, corporates and advisors has fallen, with corporate confidence

spearheading the slide in the ICI. Mounting inflationary pressure along with poor governance and

corruption have been voted as the biggest negatives for the Indian economy.

However, the survey results also reveal that the Indian financial fraternity maintains a positive outlook

towards a number of factors. For instance, although the BSE Sensex has not breached the 20,000 mark in

the past six months, 44% of investors and advisors expect the benchmark Index to trade between 20,000

and 22,000 by the end of this year. Investment activity of retail investors in mutual funds has revivedsignificantly (11 percentage points) since last quarter. India Inc. and retail investors both continue to

maintain a positive outlook towards an increase in corporate profits and personal income respectively

while the advisor community continues to be upbeat about an increase in clients investments.

It is also interesting to note that, while retail confidence across all cities hovers below 150, Delhi/ NCR

emerges as an outlier displaying highest confidence (158).


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Other key findings from the Eighth Wave:

Retail Investor Confidence Index, despite witnessing a 4.2-point decline from last quarter, ranks the

highest (137.5). Advisor Confidence Index comes a distant second (124.9) while, Corporate Confidence

Index touches its lowest (109).

Among the three advisor categories, banks (115) are the most sceptical lot, as confidence slips by 15points since March 2011. N/RDs and IFAs register a marginal fall in confidence levels (2-point and 3-poin

respectively).

Delhi investors brim with optimism; confidence reinstated among older investors

IFAs in Mumbai are a despondent lot and their confidence is the lowest this quarter (130).

Confidence among older investors (age 60 to 65 years) rebounds 15 points after dropping to 124 points

last quarter. Their confidence (139) is at par with the younger investors (age 22 to 25 years).

Mid-sized treasuries (INR 50 150 crores) witness a 23-point decline since last quarter and lose thei

pole position to small treasuries (INR 10 lakhs 1 crore, 117).

A majority of corporate treasuries (72%) and retail investors (66%) expect corporate profits and personal

income to increase in the coming six months.

Personal network continues to be the most preferred source of information for investment decision

making among retail investors (26%).

Corporate investment activity falls across all instruments; mutual funds gain traction among retail

investors

Investment activity across all instruments falls among corporate treasuries, with activity in debt mutua

funds (74%) falling 18 percentage points since last quarter. Money market mutual funds (84%) remain the

most popular debt instrument.

Retail investors activity (61%) in mutual funds has improved significantly (11 percentage points) since

last quarter. Young investors (age 22 to 25 years) along with the 55 to 60 years age group appear highly

enthusiastic about investing in mutual funds (69% and 72% respectively).

A high percentage of advisors (47%) and retail investors (29%) interpret that a long-term investment is

between 3 and 5 years. A significant percentage of retail investors (39%) and advisors (45%) expect

returns ranging between 10 15% from equity funds investments having a horizon of three years or

more.

Investors are becoming cautious as preserving capital emerges as a popular investment strategy among

retail investors (40%). However, 40% investors, in comparison to 57% in March 2011, are expected to

turn somewhat aggressive about their investment strategy in the coming 6 months.

It is interesting to note that 50% of corporate treasuries expect to maintain the current investment level in

liquid funds ahead of RBIs regulation on limiting banks exposure in liquid funds to 10% (effective from

Jan 2012).

Banking and financial services emerges as the most attractive sector for investment among retai

investors (36%) and advisors (56%).


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Asian markets continue to be the most favoured investment destination for retail investors during March

2011 (28%) and July 2011 (32%). Advisors likelihood (36%) for recommending emerging markets (such

as Latin America and Eastern Europe) for investments outside India has improved 14 percentage points

since last quarter.

Investors bullish about BSE Sensex amidst domestic and global economic woes

Retail investors (140) and advisors (126) appear relatively upbeat about the performance of the BSE

Sensex, but corporate confidence (102) regarding the same hits a low point.

Retail investors (81%) and advisors (76%) believe that the benchmark BSE Sensex will trade at higher

than current levels in December 2011.

Smaller investors (investors with investible surplus of INR 2 lakhs 5 lakhs) are the most optimistic lot

with 55% of them believing that the BSE Sensex will trade between 19,000 and 21,000.

Investors were quite bullish about the levels at which the BSE Sensex would trade at during June 2011. A

clear majority of retail investors (69%) and advisors (85%) expected the benchmark index to trade above

the levels witnessed in December 2010 (19,200 20,500). However, only 2% retail investors and 3%advisors were accurate about the trading levels in June 2011.


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123.8

132.3

146.3

145.4

140.4

141.2

146.4

135.9

0 50 100 150 200

Jul 2011

Mar 2011

Dec 2010

Sep 2010

Jun 2010

Feb 2010

Sep 2009

Jul 2009

Extremely LikelySomewhat LikelyMore or less the sameSomewhat UnlikelyExtremely Unlikely

Investment Confidence IndexFig. 3.1

Extremely LikelySomewhat LikelyMore or less the sameSomewhat Unlikely

3. Key Findings - Investment Confidence

3.1 Investment Confidence Index

The Investment Confidence Index (ICI) slips 8.5 points or 6.4% this quarter compared to March 2011 and reads

123.8, the lowest since its inception in July 2009. Global economic uncertainity, voltality in the domestic

investment envrionment, growing concern over inflation and corruption coupled with poor governance issues have

taken a toll on the already flagging ICI. Investment sentiment in the current quarter is significantly below (21.6

points) the years high (146.3) witnessed in December 2010. The continous dip in the ICI indicates that the Indian

financial community is moving to a cautious mode.

The first chart below indicates the Index levels from July 2009 to July 2011 and the following two charts give the

break-up of confidence on all the key parameters under consideration.

Fig. 3.2 Confidence over the Indian economic situation weakens

103

121

121

117

127

136

131

148

153

125

149

157

111

144

152

126

143

147

134

149

154

113

141

148

50 100 150 200

Improvement in global

economic environment

Improvement in investment market

environment and atmosphere

Improvement in Indian

economic situationJul 2009

Sep 2009

Feb 2010

Jun 2010

Sep 2010

Dec 2010

Mar 2011

Jul 2011

Neutral



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139

136

123

146

139

130

154

150

142

156

145

141

151

145

139

149

142

141

149

146

146

132

139

143

50 100 150 200

Change in amount

of investments

Appreciation in

investment portfolio

Increase in BSE Sensex Jul 2009

Sep 2009

Feb 2010

Jun 2010

Sep 2010

Dec 2010

Mar 2011

Jul 2011

Neutral


Confidence across all parameters takes a beating, thus pulling down the ICI to its all time low. Indias growth story

appears to have lost steam, as the sentiment over improvement in the Indian economy has dipped 36 points from

its peak (157) recorded a year back. Although the Indian financial community maintained high optimism over

improvement in investment environment a year ago, the outlook during the last two quarters has faltered

significantly.


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Fig. 3.3 Corporates A sceptical lot


131

124

142

147

132

159

144

132

160

135

134

152

146

131

147

152

142

145

136

134

138

125

109

137

50 100 150 200

Advisor

Corporate

RetailJul 2009

Sep 2009

Feb 2010

Jun 2010

Sep 2010

Dec 2010

Mar 2011

Jul 2011

Neutral

3.1.1 Retail Investor, Corporate and Advisor Confidence Index

The chart below indicates the break-down of the ICI into its three components Retail Investor Index, Corporate

Confidence Index and the Advisor Confidence Index from July 2009 to July 2011.

Continuing its trend of being the least confident category, corporate confidence heads further south, touching 109

points. Retail Confidence Index, which climbed to its highest (160) a year back, has plummeted 23 points since

last year and is at its lowest ever. Rising interest rates, inflationary pressures and corruption have dented

confidence levels across the board.


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Confidence scores across all sub-indices in all the three categories are negatively impacted, suggesting that

Indias growth story has hit an obstacle. Corporate confidence across all parameters has declined through the

year. However, corporates appear relatively upbeat about appreciation in investment portfolio (131). Similar to the

last quarter, advisors continue to maintain optimism over the increase in their clients investments (153), while

retail investors (clients) do not share the same sentiment (139). Corporate and advisor outlook over improvemen

in the global economy has receded to its lowest, after experiencing a spike in December 2010.

Confidence heads south across all sub-indicesFig. 3.4

ExtremelyLikely

SomewhatLikely

More or lessthe same

SomewhatUnlikely

ExtremelyLikely

SomewhatLikely


SomewhatUnlikely

July 2011 March 2011

ExtremelyLikely

SomewhatLikely


SomewhatUnlikely

ExtremelyLikely

SomewhatLikely


SomewhatUnlikely

153

138

126

93

119

120

125

131

102

82

110

104

139

138

140

134

135

139

50 100 150 200

Change in amount

of investments

Appreciation in


Increase in BSE Sensex






economic situation

Neutral

157

138

132

110

123

129

136

135

117

107

116

130

144

142

141

133

142

149

50 100 150 200

1

2

3

4

5

6

Retail

Corporate

Advisor

Neutral

173

159

142

121

142

146

137

133

124

114

142

143

153

159

160

157

160

168

50 100 150 200

Change in amount

of investments

Appreciation in








economic situation

Neutral

163

148

140

117

146

151

147

130

119

108

135

152

157

156

165

150

165

168

50 100 150 200

1

2

3

4

5

6

Retail

Corporate

Advisor

Neutral

September 2010December 2010


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150

158162

159154

139

146

152 152

126

146145 146

130

150

131

137 139

133

139

130132

140 141

135137

141

156157

166

150

156

80

120

160

200

Delhi / NCR Mumbai Kolkata Chennai Bengaluru Pune Hyderabad Ahmedabad

IFA (Sep 2010) IFA (Dec 2010)

IFA (Mar 2011) IFA (Jul 2011)

IFA confidence (Sep 2010) - 156.9 IFA confidence (Dec 2010) - 146.9

IFA confidence (Mar 2011) -139.0 IFA confidence (Jul 2011) - 136.5

Delhi investors relatively more upbeatFig. 3.5

159163

151

165 165

149

162

176

152

160

151

130133

152147

135

158

135138

144

127

136

126

138

169

156

152

163168

147

136

150

80

120

160

200

Delhi / NCR Mumbai Kolkata Chennai Bengaluru Pune Hyderabad Ahmedabad

Retail (Sep 2010) Retail (Dec 2010)

Retail (Mar 2011) Retail (Jul 2011)

Retail confidence (Sep 2010) -160.1 Retail confidence (Dec 2010) - 159.5

Retail confidence (Mar 2011) - 142.0 Retail confidence (Jul 2011) - 137.5

3.1.2 Retail investor and IFA confidence By city

The charts below represent the confidence level among retail investors and IFAs in each of the eight cities

surveyed.

Retail confidence hovers below 150 across all cities, except for Delhi/NCR, which displays the highest confidence

(158) in the current quarter. Confidence among retail investors in Hyderabad, Chennai and Ahmedabad has fallen

continuously since last year, with Hyderabad witnessing the largest fall of 36.7 points from September 2010

levels. On the other hand, IFAs in Bengaluru and Ahmedabad exhibit the highest confidence this quarter (141).

Interestingly, IFAs and retail investors in Bengaluru display contrasting sentiment. While IFA confidence in

Bengaluru is the highest, it is the lowest for retail investors (127).


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Fig 3.6 Confidence drops to July 2009 levels

137

134

135

139

142

133

142

149

159

157

160

168

160

150

165

168

151

147

155

159

147

142

150

156

145

140

146

150

138

132

139

142

50 100 150 200

Retail Investor Confidence






economic situation

Jul 2009

Sep 2009

Feb 2010

Jun 2010

Sep 2010

Dec 2010

Mar 2011

Jul 2011

Neutral



137

139

138

140

142

144

142

141

159

153

159

160

160

157

156

165

151

147

147

153

147

138

141

152

145

141

143

149

138

136

138

140

50 100 150 20

Retail Investor Confidence

Change in amount

of investments

Appreciation in



Jul 2009

Sep 2009

Feb 2010

Jun 2010

Sep 2010

Dec 2010

Mar 2011

Jul 2011

Neutral

3.2 Retail Investor Confidence

The Investor Confidence Index falls to its lowest level in the last four quarters and stands at 137 in July 2011.

The chart below gives a comparison of the Investor Confidence Index between July 2009 and July 2011 along

with the break-up of confidence of all the key parameters under construction.


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Confidence among older investors revivesFig. 3.7

151

143

136

140

159162

159 161 160 161

155153

155

161164

160157 157

153157

140140

142 143

149

138136

125 124

139137

140138

130

135

139

120

130

140

150

160

170

180

Age 22 to 25 Age 25 to 30 Age 30 to 35 Age 35 to 40 Age 40 to 45 Age 45 to 50 Age 50 to 55 Age 55 to 60 Age 60 to 65

Sep 2010 Dec 2010 Mar 2011 Jul 2011Retail Confidence (Dec 2010) - 159.5

Retail Confidence (Jul 2011) - 137.5

Retail Confidence (Sep 2010) - 160.1

Retail Confidence (Mar 2011) - 142.0

The Investor Confidence Index falls 23 points from the year-ago high (160) and is now at par with the July 2009

score (138). Optimism levels across the underlying sub-indices have also weakened and are largely aligned with

July 2009 levels. Retail sentiment towards improvement in the investment environment (135) has recorded the

largest fall (30 points) since September 2010 (165). Correspondingly, optimism over appreciation in portfolio (138)

and change in amount of investments (139) has faded significantly (18 points) over the year.

3.2.1 Retail Confidence - By Age

The chart below depicts Retail Investor Confidence computed on the basis of the age bracket the investors

belonged to.

Confidence among older investors (aged 55 to 60 years and 60 to 65 years), after witnessing a continuous

decline during the past two quarters, has edged up 10 and 15 points respectively. However, investors aged 50 to

55 years have the lowest confidence this quarter (130).

3.2.2 Retail Confidence - By Occupation

Retail Investor Confidence when computed on their occupation suggests that confidence of retail investors

belonging to different occupations except for professionals has fallen from March 2011 levels.

Confidence among professionals (134) has improved marginally (3 points) from March 2011.

Amidst heavy fall of confidence, professionals confidence reboundsFig. 3.8

169

158

162

157158

160

131

142 143

134136

139

129

159156

134

120

125

130

135

140

145

150

155

160

165

170

175

180

Professional Self-employed Salaried Employee-Private Sector Salaried Employee-Government

Sep 2010 Dec 2010

Mar 2011 Jul 2011

Retail Confidence (Sep 2010) - 160.1

Retail Confidence (Mar 2011) - 142.0

Retail Confidence (Dec 2010) - 159.5

Retail Confidence (Jul 2011) - 137.5


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Fig. 3.9 Corporate confidence at an all time low

109

82

110

104

124

107

116

130

132

108

135

152

134

96

136

152

134

96

136

152

131

115

136

135

142

132

147

159

134

109

143

147

50 100 150 200

Corporate Confidence Index






economic situation

Jul 2009

Sep 2009

Feb 2010

Jun 2010

Sep 2010

Dec 2010

Mar 2011

Jul 2011

Neutral



109

125

131

102

124

136

135

117

132

137

133

124

132

147

130

119

134

147

139

134

131

135

132

131

142

137

138

143

134

126

131

145

50 100 150 200

Corporate Confidence Index

Change in amount

of investments

Appreciation in



Jul 2009

Sep 2009

Feb 2010

Jun 2010

Sep 2010

Dec 2010

Mar 2011

Jul 2011

Neutral

3.3 Corporate Investor Confidence

The Corporate Confidence Index (109) has fallen continously during the past four waves, and has touched its

lowest this wave.

The chart below gives the break-up of corporate confidence for all eight quarters between July 2009 and July

2011 on all the key parameters under consideration.


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Corporate confidence across all parameters has faltered significantly since July 2009. The subdued confidence

can be attributed to weakening of optimism over the Indian economy (104) and the investment environment (110)

Confidence across both these parameters has slipped 33and 43 points respectively since July 2009.

India Inc. does not appear hopeful of a global economic recovery in the near future, as outlook towards the globa

economy (82) among corporate treasuries has receded 25 points since last quarter.

3.3.1 Corporate Confidence - By treasury size

Corporate Investor Confidence when computed on the respondents treasury size showed a declining trend

across all treasury sizes over the last quarter.

Confidence within medium-sized corporate treasuries (INR 50 150 crores) showed the sharpest decline (23

points) from March 2011 to reach 115 points. Smaller treasuries (INR 10 lakhs 1 crore) appear relatively more

confident (117) this quarter.

Looking at trends from earlier quarters, we can conclude that sentiments do not heavily depend on treasury size.

Confidence declines across all treasury sizesFig. 3.10

171

129135

126 132133

140

127 134127121

138

123117

106115

97

111120

114

50

100

150

200

INR 10 lakhs - 1 crore INR 1 50 crores INR 50 150 crores INR 150 500 crores INR 500 crores

and above

Sep 2010 Dec 2010

Mar 2011 Jul 2011

Corporate Confidence (Sep 2010) - 131.8 Corporate Confidence (Dec 2010) -132.2

Corporate Confidence (Mar 2011) - 123.5 Corporate Confidence (Jul 2011) - 109.0


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Fig. 3.11 Advisor confidence loses momentum


125

93

119

120

131

110

123

129

147

121

142

146

117

152

97

144

146

151

135

90

140

145

146

120

143

150

131

153

154155

145

140

50 100 150 200

Advisor Confidence Index

Improvement in globaleconomic environment




economic situation

Jul 2009

Sep 2009

Feb 2010

Jun 2010

Sep 2010

Dec 2010

Mar 2011

Jul 2011

Neutral


125

153

138

126

131

157

138

132

147

173

159

142

163

152

132

145

144

148

140

135

160

147

130

146

174

152

138

168

157

147

136

147

50 100 150 2

Advisor Confidence Index

Change in amount

of investments

Appreciation in



Jul 2009

Sep 200

Feb 201

Jun 201

Sep 201

Dec 201

Mar 201

Jul 2011

Neutral

3.4 Advisor Confidence Index

The Advisor Confidence Index for July 2011 (125) sinks to its lowest, falling 6 points from March 2011 (131).

The chart below gives the break-up of advisor confidence on all the key parameters under consideration from the

inception of the index i.e. July 2009 to July 2011.


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Banks confidence hits an all-time lowFig. 3.12

124

115

136

126

130

139

147

148

147

140

135

157

50 100 150 200

N/RDs

Banks

IFA

Sep 2010

Dec 2010

Mar 2011

Jul 2011

Neutral


Low levels of confidence over the Indian economy (120) and the domestic investment environment (119) have

dragged the Advisor Confidence Index to its lowest. The above-mentioned parameters have fallen 35 points and

21 points since July 2009 respectively.

However, amidst global and domestic economic uncertainties, the advisor community is relatively upbeat about

an increase in its clients investments (153).

3.4.1 Advisor Confidence - By category

Advisor sentiment continues to decline in July 2011, with confidence falling across all three categories

Interestingly, confidence across all categories has hit the lowest since September 2010, signifying pessimism

within the advisor community.

Banks confidence (115) has drubbed 15 points since last quarter, thus suggesting that the category is the mos

affected by the uncertainity surrounding the global and domestic economy and investment environmnent

Confidence among IFAs (136) and N/RDs (124) has witnesed only a marginal decline since last quarter.


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Page 18

Investments for 3 to 5 years considered as Long-term investmentsFig. 4.1

2%

13%

24%

29%

20%

8%

3%

6%

28%

20%

32%

12%

0%2%0%

4%

25%

47%

19%

4%

0%0%

10%

20%

30%

40%

50%

60%

Less than 1 year 1 year 2 years 2 years 3 years 3 years 5 years 5 years 10 years Over 10 years Can't Say

Retail Corporate Advisor

4. Investment Strategy & Activity

The survey asked respondents from the retail, advisor and corporate investor categories about the preferred

duration of a long-term investment and their expectation of a return from these long-term investments. Apart from

that, the section below also covers the investment activity of the three categories over the past year.

4.1 Investment period

As part of the survey in July 2011, all the three categories of respondents were asked their interpretation of longterm when recommended to make a long-term investment. The chart below depicts their interpretation of the

period for long-term investments.

As seen in the chart above, a high percentage of advisors (47%) and retail investors (29%) show that an ideal

long-term investment period is between 3 and 5 years. On the other hand, corporates had a more skewed

interpretation ranging from 1 to 5 years. Of them, a considerable percentage (28%) considers a shorter period

i.e.1 2 years, as long-term investment period.


19/48


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Page 20

4.3 Retail Investment activity

The chart below represents the change in percentage of respondents who invested in each of the said investmen

instruments for all four quarters. Please note that the chart only indicates investment activity and does no

indicate the asset allocation.

Most retail investors are looking forward to invest in mutual funds. Mutual fund investments saw substantia

improvement, as 61% retail investors have shown interest in investing in them as compared to March 2011

wherein only 50% had shown interest in investing in mutual funds.

Fig. 4.3

* Other stock market derivative products (e.g. futures, options)

Mutual fund investment activity picks up

5%

36%35%

69%

52%

92%

7%

36%35%

56%54%

95%

9%

27%22%

58%

37%

89%

9%

25%29%

59%

42%

82%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Savings account Time deposit Insurance and

Retirement products

Property Gold and other bullion Foreign currencies

Sep 2010 Dec 2010

Mar 2011 Jul 2011

76%

60%

18%12%

3%

18%

1%

68% 66%

23%

13%

4%

12%

2%

61%

50%

19%16%

2%

13%

1%

64%61%

22%20%

4%

12%

1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Stocks Mutual Funds Bonds Certificate of

deposits

Warrants Derivatives* Others


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Page 21

Younger investors enthusiastic about Mutual FundsFig. 4.5

72%

61%

56%60%

66%62%63%

57%

62%

58%60%

44%

65%

50%

60%

69%66%

70%

66%68%

63%

71%

37%

50%

59%

50%50%48%

32%

62%

68%69%

56%

62%60%63%

30%

40%

50%

60%

70%

80%

90%

100%

Age 22 to 25 Age 25 to 30 Age 30 to 35 Age 35 to 40 Age 40 to 45 Age 45 to 50 Age 50 to 55 Age 55 to 60 Age 60 to 65

Sep 2010 Dec 2010 Mar 2011 Jul 2011

Investment in Mutual Funds shows substantial increase across all wallet sizesFig. 4.4

63%66%

60%61%64%

68%

54%58%

75%

70%70%

61%

67%

41%

49%49%49%

54%58%

72%

30%

40%

50%

60%

70%

80%

90%

100%

INR 2 to 5 lakhs INR 5 to 10 lakhs INR 10 to 25 lakhs INR 25 to 50 lakhs INR 50 lakhs and above

Sep 2010 Dec 2010 Mar 2011 Jul 2011

Investment activity in mutual funds has improved significantly. Investors with wallet size of INR 5 to 10 lakhs

display the highest amount of investment activity (72%) in mutual funds. A lesser percentage of investors falling

under wallet size of INR 25 lakhs and above show preference for mutual funds.

Investors across ages show inclination to invest in mutual funds. Young investors aged between 22 to 25 years

(69%) and investors in the age group of 50 to 55 years (68%) show sharp rise in mutual funds activity as

compared to March 2011. Investors aged 55 to 60 years show consistent increase in mutual fund activity since

last 4 quarters.


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Page 22

Retail investors to preserve capitalFig. 4.6

Aggressive investment strategy expectedFig. 4.7

15%

40%

35%

10% Risk Averse

Preserve Capital

CautiousInvestments

Willing to takerisks

14%

40%31%

12%3%

Extremelyaggressive

Somewhataggressive

No change

Somewhatconservative

Extremely

conservative

4.4 Retail Investors Investment Strategy

Fig 4.6 represents the current investment strategy (risk

appetite) among retail investors in March 2011.

The current investment strategy for 40% of the retaiinvestors is to preserve their capital while accepting smal

price fluctuations to enhance their potential returns in the

future.

Fig 4.7 represents the investment strategy among retai

investors in the coming six months.

Retail investors (40%) expect to be extremely aggressive

about their investment strategy in the coming six months

indicating a bullish sentiment for that period. 31%

investors expect to continue with their current investment

strategy in the coming 6 months.


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Page 23

4.5 Corporate Investment Activity

The survey asked respondents from corporate treasuries about their investment activity across various categories

of investment options during the last 12 months. The chart below depicts the change in investment activity of

corporate investors between September 2010 and July 2011.

Investment activity across all investment instruments (Term deposits, Debt mutual funds, Equity mutual funds and

stocks etc.) falls among corporate treasuries in July 2011 as compared to the last quarter. Equity investment

activity plummets to 18% as compared to 46% in March 2011. Similarly, debt mutual funds investment activity

declines 18 percentage points to 74% as compared to the last quarter (92%) indicating a bearish sentiment, both

in equities and debt market.

Fig. 4.8 Corporate investment activity takes beating across all instruments

26%24%

94%

32%30%

56%

45%

37%

90%

47%43%

67%

46%

38%

92%

44%

32%

74%

18%

26%

74%

30%

22%

70%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Term deposi ts Inter-corporate deposits Commercial Papers Debt Mutual Funds Equity Mutual Funds Stocks

Sep 2010 Dec 2010

Mar 2011 Jul 2011

30% 28%

8% 6% 4%8%

59%

45%

24% 25%

14%

0%

48%

38%

16%

10%6%

2%

34%

22%

4% 4% 2% 4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bonds Certificate of deposits Warrants Derivatives* Structured products Others


24/48


Page 24

Fig. 4.9 Money Market Funds preferred over the other debt instruments

0%

8%

14%

36%

84%

20%

0%

32%

40%

60%

86%

46%

0%

25%

39%

69%

67%

35%

12%

20%

34%

54%

88%

32%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Others

GILT funds

Floating Rate

Debt Funds

Fixed Maturity

Plans

Money MarketFunds

Bond funds

Sep 2010

Dec 2010

Mar 2011

Jul 2011

Corporates to maintain currentinvestments in liquid funds

10%

18%

50%

12%

10%Definitely willincrease

Somewhat likely toincrease

Maintain the currentinvestment amount

Somewhat likely todecrease

Definitely willdecrease

Fig. 4.10

The chart above indicates the change in investment activity among corporate treasuries in various Debt mutua

funds over the four quarters (September 2010 to July 2011).

Investment activity in Money Market Funds (84%) remained higher as compared to other debt funds like bond

funds, fixed maturity plans, floating rate funds and GILT funds. (The investment activity fell 26, 24, 26 and 24

percent points respectively).

4.6 Effect of RBIs regulation on exposure to liquid funds

The survey asked respondents from corporate treasuries

whether they will increase or decrease their investments in

liquid mutual funds prior to the implementation of RBIs

regulation on limiting banks exposure in liquid funds to 10%

(of the previous years networth) from January 2012. Fig

4.10 shows responses of the corporate investors in July

2011.

Ahead of the new regulation of limits, 50% of corporates wil

maintain the current investment amount and 18% are

somewhat likely to increase investments in liquid mutua

funds.


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Page 25

Corporates not keen to make capital investments in coming 6-12 monthsFig. 4.11

26%18%

4%

24%12%

8%

12%

36%18%20%

24%

24%

12%27%

40%

8%

36%

24% 20%

8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sep 2010 Dec 2010 Mar 2011 Jul 2011

Extremely likely

Somewhat likely

More or less the

same

Somewhat unlikely

Extremely unlikely

4.7 Capital Investment Activity

The survey asked respondents from corporate treasuries about their likelihood of increasing capital investments in

the next 612 months. Fig. 4.11 shows responses of the corporate investors during the last four quarters

(September 2010 to July 2011).

A majority of corporates (60%) do not plan to make capital investments over the next 6-12 months in the rising

interest rate scenario. (36% and 24% of the corporates are somewhat unlikely and extremely unlikely

respectively to make capital investments.)


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Page 26

5. International Investment Preference

5.1 Retail investors and Advisors International Investment Preference

In the current wave, the survey asks retail investors about their interest in investing in markets other than India.

Similarly, the survey asks advisors whether they would advise their clients to invest in international markets and

here is what the retail investors and advisors have to say.

As the global economic confidence drops further, only 16% of the retail investors show interest in investing in

international markets. Advisors on the other hand are quite upbeat over the emerging markets and 40% advice

their clients in favour of investing abroad.

In July 2011, only 16% retail investors indicated an inclination to invest in domestic markets. Compared to that

advisors (40%) are open to recommending clients to invest in international markets. Emerging markets (such as

Eastern Europe and Latin America) are the most attractive investment destination among advisors (36%) while fo

retail investors, Asian markets (32%) are the most preferred investment destination. USA is the second most

preferred international investment destination among retail investors (27%).

Fig. 5.1 Advisors more inclined towards international markets

AdvisorRetail

40%

60%

Yes

No

16%

84%

Yes

No

Advisors recommend investing in emerging marketsFig. 5.2

27%

20%

13%

32%

13%15%

7%

0%

7%

4% 5%

24%

13%

22%

36%

4%

0%

10%

20%

30%

40%

50%

USA Europe Japan Asia South East Asia Greater China Emerging markets Others

Retail Advisors


27/48


Page 27

5.2 Retail investors: International Investment Preference - By Liquid Assets / Wallet size

The chart below depicts the preference of retail investors interested in investing in international markets based on

their wallet size.

Investors across all wallet sizes mostly favour Asia followed by USA. HNIs (INR 50 lakhs and above) have

preferred emerging markets most as compared to lesser wallet sized investors (INR 2 to 50 lakhs).

Retail investors pick Asian markets to investFig. 5.3

20%

12%

32%

13%11%

6%

20%

13%11%

18%

5%

23%

14%

19%17%

6%

17%

13%

10%

13% 13%15%

9%

29%

15%

12%

17%

26%

28%

25%

35%

32%

35%

30%

24%

0%

10%

20%

30%

40%

50%

USA Europe Japan Asia South East Asia Greater China Emerging markets

INR 2 to 5 lakhs INR 5 to 10 lakhs

INR 10 to 25 lakhs INR 25 to 50 lakhs

INR 50 lakhs and above


28/48


Page 28

5.3 Advisors: International Investment Preference

The first chart depicts the percentage of all three advisor categories (IFAs, Banks and N/RDs) advising their

clients to invest in international markets other than India. The second chart depicts preference of the three advisor

categories about investment destinations they would recommend to their clients. Banks (30%) appear least keen

to recommend investments in destinations other than India, followed by IFAs.

Banks (36%) indicate a clear preference for Asia as an international investment destination while 60% of N/RDs

and 34% of advisors opt for emerging markets. Japan is the least preferred investment destination as both banks

and N/RDs are likely to recommend against investing in Japan.

Banks most sceptical to recommend investing outside IndiaFig. 5.4

50%

70%60%

50%

30%

40%

0%

20%

40%

60%

80%

100%

IFA Banks N/RDs

Yes

No

Asia one of the favourites among banks, while IFAs and NRDs favour Emerging marketsFig. 5.5

5%

14%17%

12%

24%

34%

5%7%

0%

36%

7%

21%

14%

7%

0% 0%

20% 20% 20%

60%

0%

11%

0%

10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

USA Europe Japan Asia South East Asia Greater China Emerging markets Others

IFA Banks N/RD


29/48


Page 29

6. Major Economic Indicators

The survey asked respondents across all three key categories regarding the most positive and negative economic

indicators in the current Indian economic situation. This section highlights the factors that each category

considered as the major driver and impediment for the Indian economy over the past year.

6.1 Positive economic indicators in July 2011

The first chart displays responses from all the three respondent categories regarding the most positive economic

indicators. The second series of charts exhibits responses regarding positive economic indicators that influenced

the economy in each quarter over the last year.

GDP growth is the most positive economic indicator this quarter for all respondent categories. A higher

percentage of corporates (20%), advisors (31%) and retail investors (23%) chose GDP growth as the mos

positive economic indicator in the current scenario. An interesting finding this quarter is that a high number of

corporate treasuries showing confidence in GDP growth as a positive indicator has fallen by 26 percentage points

from March 2011 and 33 percentage points from December 2010. More corporates have started showingconfidence in Good Corporate Results and Increase in Employment Opportunity as positive indicators for the

economy.

RBIs continued monetary measures was the second most positive economic indicator chosen by retail investors

(20%), corporates (18%) and advisors (23%) in this quarter.

Fig. 6.1 Healthy GDP growth a leading economic indicator

11%

23%20%

14%10%

7%

13%

1%

12%

20% 18% 16%

10% 10% 10%

4%

15%

31%

23%

4%2%

8%11%

5%

0%

10%

20%

30%

40%

50%

60%

Good corporate

results

GDP growth

meeting/exceeding

expectations

RBIs continued

monetary

measures

Increase in

employment

opportunities

Increased credit

offtake from the

private sector

Increase in

Industrial output /

Exports

Government's fiscal

measures

Others

Retail Corporate Advisors


30/48


Page 30

6.2 Positive economic indicators through the year

The following charts exhibit the three positive economic indicators that gathered most votes in July 2011, March

2011, December 2010 and September 2010.

GDP growth has remained the most positive economic indicator over the year among corporate treasuries and

advisors. Although number of advisors voting GDP as the most positive economic indicator has dropped by 18

percent points since December 2010, it has rebound in this quarter (31%) by 5 percent points since last quarter,

March 2011 (26%).

The outlook of corporate treasuries over their profitability (12%) has remained stable after a sudden fall in the last

quarter when the number of corporate voting Good Corporate result as a Positive Indicator had fallen to 4 percent

points. It has rebound by 8 percent points since March 2011 to remain close to September 2010 (14%).

Corporates show bleak outlook on profitabilityFig. 6.2

Se tember 2010December 2010

Jul 2011 March 2011

11%

23%20%

12%

20%18%

15%

31%

23%

0%

10%

20%

30%

40%

50%

60%

Good corporate results GDP growth

meeting/exceeding

expectations

RBIs continued

monetary measures

15%

25%

19%

4%

46%

12%

24% 26%21%

0%

10%

20%

30%

40%

50%

60%

70%

80%


meeting/exceeding

expectations

RBIs continued

monetary measures


19% 20%17%

12%

53%

6%

14%

49%

6%

0%

10%

20%

30%

40%

50%

60%


meeting/exceeding

expectations

RBIs continued

monetary measures

25%

16%13%14%

34%

16%

11%

37%

7%

0%

10%

20%

30%

40%

50%

60%


meeting/exceeding

expectations

RBIs continued

monetary measures



31/48


Page 31

6.3 Negative economic indicators in July 2011

The financial community voted their opinion on the biggest issues that have had a negative impact on the current

economic situation in India. The chart below depicts responses of each of the three respondent categories when

surveyed this quarter (July 2011).

There has been a consensus among all respondent categories that inflation is the most negative economic

indicator this quarter. It is concerning that a very high percentage of advisors (54%) and corporate (58%) are

worried about inflation.

After inflation, corruption is the second most negative economic indicator in the current scenario with retai

investors (23%), advisors (22%) and corporates (18%).

The rise in interest rates has also triggered caution amongst few advisors (18%) and retail investors (9%).

Fig. 6.3 Inflation worries Indian financial community the most

31%

10%

17%

9% 7%

23%

3%

58%

2%

6% 6% 6%

18%

4%

54%

3%

1%

18%

1%

22%

1%0%

10%

20%

30%

40%

50%

60%

70%

80%

Inflation Impact of changing

climate globally

High govt borrowings

/ high fiscal deficit

Increase in interest

rates

Eurozone sovereign

debt crisis

Poor governance and

corruption

Others



32/48


Page 32

19% 19% 17%

63%

8%4%

48%

16%

4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Inflation Corruption High govt borrowings /

high fiscal deficit

26%

16%

26%30%

8%

30%

40%

14%

36%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Inflation High govt borrowings /

high fiscal deficit

Fear of resurgence of

US / global recession


December 2010 September 2010

Inflation and corruption - the leading negative indicatorsFig. 6.4

31%

23%

17%

58%

18%

6%

54%

22%

1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Inflation Poor governance and

corruption

High govt borrowings /

high fiscal deficit

26%22%

17%

70%

12%

4%

60%

22%

8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Inflation Corruption High govt borrowings /

high fiscal deficit


March 2011July 2011

6.4 Negative economic indicators through the past year

The following charts exhibit the top three negative economic indicators in July 2011, March 2011, December 2010

and September 2010.

Inflation has remained the biggest cause of concern over the year among all category of respondents. There has

been an increase of 28 percentage points and 14 percentage points in the number of corporates and advisors

respectively, fearing inflation since September 2010. Poor governance and corruption affects India Inc. ascorporates opting for corruption as the most negative economic indicator rose by 10 percentage points to stand a

18% as compared to 8% in December 2010.


33/48


Page 33

7. BSE Sensex

7.1 BSE Sensex likely to trade between 19,000 21,000 in December 2011

7The survey asked retail investors and advisors to indicate a level where they expect the BSE Sensex to be

trading at the end of December 2011. The chart below represents the responses of retail investors and advisors

for each range of the BSE Sensex

During the survey period, the Sensex ranged between 16,999 and 18,999. Retail investors (25%) and advisors

(35%) estimate Sensex to rise around 20000 21000 level. Retail (81%) sentiment on increase in BSE Sensex is

marginally higher than that of advisors (76%). 48% of retail investors and 58% advisors expect the benchmark

BSE Sensex to trade between 19,000 and 21,000 in December 2011.

Fig. 7.1 Retail investors and advisors brim with optimism over BSE Sensex levels

1%2%

10%

19%

25%

23%

12%

4%

2%

1%

0%0% 1%

0%0%

7%10%

35%23%

15%

5%

0%

3%

1%0%

1%

-5%

5%

15%

25%

35%

45%

0- 14000 14000 -

15000

15000 -

16000

16000 -

17000

17000 -

18000

18000 -

19000

19000 -

20000

20000 -

21000

21000 -

22000

22000 -

23000

23000 -

24000

24000 -

25000

25000 -

26000

Retail Advisor

BSE Sensex

during the

Survey


34/48


Page 34

7.2 BSE Sensex expectation by Wallet Size Retail

The survey asked retail investors to indicate the range they expect the BSE Sensex to trade in December 2011

The chart below depicts the percentage of respondents from each wallet size.

Investors across all wallet sizes expect the BSE Sensex to trade above current levels. However, small investors

(wallet size INR 2 lakhs 5 lakhs) are the most optimistic lot, with 55% of them believing that the BSE Sensex wil

trade between 19,000 and 21,000. In comparison, only 35% of investors with wallet size INR 25 to 50 lakhs

expect the BSE Sensex to trade between 19,000 and 21,000.

Smaller investors bullish about the SensexFig. 7.2

1%

2%

0% 0% 2%

2%

10%

30%

25%

16%

8%

2%2%

2%

1%0%0%0%

1%3%

4%

11%

22%

27%

18%

12%

1%0%

23%

0%0%

1% 0%

2%

26%

20%

8%

3%

14%

1%2%

0% 0%

1%

1%

7%

14% 16%

18%

24%

12%

3%1%

1%

24%

0% 0% 1%

6%

4%

17% 17%

10% 7%

10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

0- 14000 14000 -

15000

15000 -

16000

16000 -

17000

17000 -

18000

18000 -

19000

19000 -

20000

20000 -

21000

21000 -

22000

22000 -

23000

23000 -

24000

24000 -

25000

25000 -

26000

INR 2 to 5 lakhs

INR 5 to 10 lakhs

INR 10 to 25 lakhs

INR 25 to 50 lakhs

INR 50 lakhs and

above

BSE Sensex

during the survey


35/48


Page 35

3%0%0%0%

3%

0%

22%31%

33%

8%

0%0%

0%0%0% 0% 0%

8%

15%23%

15%

0%0%0%

4%0%

35%

0% 0%

10%

23%

32%

26%

3%

0%0%

0%

3%3%

0% 0%

8%

31%

27%

15%

12%

0%

0%0%0%0%

4%

-5%

5%

15%

25%

35%

45%

55%

0- 14000 14000 -

15000

15000 -

16000

16000 -

17000

17000 -

18000

18000 -

19000

19000 -

20000

20000 -

21000

21000 -

22000

22000 -

23000

23000 -

24000

24000 -

25000

25000 -

26000

Bengaluru

Pune

Hyderabad

Ahmedabad

BSE Sensex during

the survey

7.3 BSE Sensex expectation by City IFA

The charts below represent the responses of IFAs by city on the level they expect the BSE Sensex to trade by the

end of December 2011.

Delhi/ NCR and Hyderabad IFAs are the most optimisitc about BSE Sensex trading levels in December 2011.

90% of IFAs from both the cities expect the BSE Sensex to trade between 19,000 and 23,000 six months later.

However, Mumbai IFAs appear less optimistic as only 76% believe that the BSE Sensex will trade between

19,000 and 23,000 in December 2011.

Delhi and Hyderabad IFAs most optimistic about the BSE SensexFig. 7.3

7%

0%0%0%0% 0% 0%

0% 0%

3%

20%

27%37%

7%0% 0%

2% 4% 4%

0%

0%

9%

27% 27%18%

4%2% 0%

0%

0% 0%

3% 3%7%

14%

55%

7%7%

3% 4%

7%

0% 0% 0% 0% 0%

7%

19%

37%

15% 11%

0%-5%

5%

15%

25%

35%

45%

55%

65%

0- 14000 14000 -

15000

15000 -

16000

16000 -

17000

17000 -

18000

18000 -

19000

19000 -

20000

20000 -

21000

21000 -

22000

22000 -

23000

23000 -

24000

24000 -

25000

25000 -

26000

Delhi / NCR

Mumbai

Kolkata

Chennai

BSE Sensex

during the survey


36/48


Page 36

7.4 BSE Sensex: Expected vs. Actual trading level for June 2011

In December 2010, the survey asked retail investors and advisors to indicate a level at which they expected the

BSE Sensex to trade at the end of June 2011. The chart below shows the comparison of values predicted by

retail investors and advisors in December 2010 and the actual trading level in June 2011.

Retail investors and advisors were highly optimistic about the BSE Sensex level in June 2011. Over 95% retai

investors and advisors expected the BSE Sensex to trade above 19,000 in June 2011. However, the actua

trading level in June 2011 was below 18,500. Only 2% retail investors and 3% advisors proved correct about their

expectations.

BSE Sensex trades below expectationsFig. 7.4

2%0%

1%

1%

4%4%

11%

23%23%

22%

6%

1%1%

1%

0%0%

5%4%

21%

29%

27%

10%

1%3%

0%

1%

-5%

5%

15%

25%

35%

0- 17000 17000 -

18000

18000 -

19000

19000 -

20000

20000 -

21000

21000 -

22000

22000 -

23000

23000 -

24000

24000 -

25000

25000 -

26000

26000 -

27000

27000 -

28000

28000 and

above

Retail AdvisorBSE Sensex

in June 2011

BSE

Sensex in

December

2010


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Page 37

3%

0%1%1%

1%

2%

5%

12%

30%24%

16%

1%

3% 0%0%0%

5%1%

0% 1%

9%

65%

16%

2% 2% 1%1%

1%1%

1% 2%1%

2%

12%

31%

31%

6% 2%

8%

7%3%4%

1% 0%

2%6%

11%

17%

20%15%

8% 5%

-5%

5%

15%

25%

35%

45%

55%

65%

75%

0- 17000 17000 -

18000

18000 -

19000

19000 -

20000

20000 -

21000

21000 -

22000

22000 -

23000

23000 -

24000

24000 -

25000

25000 -

26000

26000 -

27000

27000 -

28000

28000 and

above

Bengaluru PuneHyderabad Ahmedabad

BSE Sensex

in June 2011

BSE

Sensex in

December

2010

7.5 BSE Sensex expectations for June 2011: Retail Investors by City

The chart below shows a comparison of the values expected by retail investors across various cities and the

actual values at which the BSE Sensex traded in June 2011.

Majority of retail investors across 8 cities expected the BSE Sensex to trade between 19,000 and 24,000, with

Pune (97%) investors being the most optimistic. However, the expectations were way above, as the BSE Sensex

traded between 17,000 and 18,500 during June 2011. Kolkata recorded the highest percentage of investors (4%)

who were accurate about the trading levels in June 2011.

Fig. 7.5 Pune investors were most optimistic in December 2010

3%2%

2%6%

3%

13%

40%

19%

9%

3%

1%0%0% 1%

0%1%4%

6%

12%

22%

20%25%

7%

0%0%0% 2%

0%

0%

3%1%

5%

17%

30%29%

9%

3%2%

1% 0%0%

2%4%

8%

19%

29%

22%

8%6%

2%1%

0%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0- 17000 17000 -

18000

18000 -

19000

19000 -

20000

20000 -

21000

21000 -

22000

22000 -

23000

23000 -

24000

24000 -

25000

25000 -

26000

26000 -

27000

27000 -

28000

28000 and

above

Delhi / NCR MumbaiKolkata ChennaiBSE Sensex

in June 2011

BSE

Sensex in

December

2010


38/48


Page 38

0%0%0%0%0%0%

4%

0% 0%

4%

4%

31%27%

12%

12%

8%

0%0%

43%

0%

4%

0% 0%

4%

29%

14%7%

0%0%0%0%

5% 5%

0%

0%10%

52%

24%

5%

0% 0%0%

3%

3%

0%

0%3%

33%

24%

18%

6%

9%

-5%

5%

15%

25%

35%

45%

55%

65%

0- 17000 17000 -

18000

18000 -

19000

19000 -

20000

20000 -

21000

21000 -

22000

22000 -

23000

23000 -

24000

24000 -

25000

25000 -

26000

26000 -

27000

27000 -

28000

28000 and

above

Bengaluru

Pune

Hyderabad

Ahmedabad

BSE

Sensex in

December

2010

BSE Sensex

in June 2011

7.6 BSE Sensex expectations for June 2011: IFAs by city

The chart below shows the December 2010 survey responses of IFAs across cities on the levels the BSE Sensex

was expected to trade in June 2011.

In December 2010, IFAs across most cities expected the BSE Sensex to trade between 21,000 and 26,000 in

June 2011, with Pune IFAs being the most optimistic (93%). However, Hyderabad IFAs (9.5%) were the most

accurate about the BSE Sensex levels in June 2011. Interestingly, 7% IFAs in Kolkata expected the Sensex to

trade below 17,000 in June 2011.

Fig. 7.6 IFAs expected the sensex to trade between 21,000 and 26,000

0%0%0%0%

4%

4%

14%

11%

18%

25%

18%

4%

0%4%0%

0%

0%0%

8%8%

23%

23%23%

4%

12%

0%0%

0% 0%

0%

7%0%

15%

26%

44%

0%0%0%0%

7%

0%0%0%0%

20%

36%

28%

8%

0%

4%

0%

4%

-5%

5%

15%

25%

35%

45%

55%

0- 17000 17000 -

18000

18000 -

19000

19000 -

20000

20000 -

21000

21000 -

22000

22000 -

23000

23000 -

24000

24000 -

25000

25000 -

26000

26000 -

27000

27000 -

28000

28000 and

above

Delhi / NCR

Mumbai

Kolkata

Chennai

BSE

Sensex in

December

2010

BSE Sensex

in June 2011


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Page 39

8. Other Findings

8.1 Comparison between increase in personal income and corporate profits

The survey asked retail and corporate respondents their opinion on the likelihood of personal income/corporate

profits improving in the next six months. The following chart shows the percentage breakdown of responses for

retail investors and corporate investors for July 2011, March 2011, December 2010 and September 2010.

Despite rising interest rates and inflationary pressures, percentage of corporates expecting rise in profits has

declined only marginally from 76% in March 2011 to reach 72% in July 2011. On the other hand, the percentage

of retail investors expecting an increase in personal income has dropped by 9 percentage points from March 2011

to reach 66% in July 2011.

8.2 Sector preference

The survey asked retail investors and advisors in which sectors they would prefer to invest in the coming quarters

The chart below depicts sector preference of retail investors and the advisors in July 2011.

Both retail (36%) and advisors (56%) recommend investing in the banking and financial services sector. Advisors

appear to be bullish about the FMCG segment as 38% recommend investing in this sector. However, retail and

advisors share contrasting sentiments regarding the automotive sector. 23% retail investors favour investing in

the automobile sector, while only 4% advisors favour this sector.

Fig. 8.1 Corporates outlook on profitability slides marginally

0%0%0%0%1%0%0%0%2%2%

0%4%

7%

2%1%1%

26%22%

16%20%

26%

23%17%

15%

54%

34%

71%

40%

47%

53%

49%46%

18%

42%

14%

36%

19%22%

32%37%

0%

20%

40%

60%

80%

100%

Retail (Sep

2010)

Retail (Dec

2010)

Retail (Mar

2011)

Retail (Jul

2011)

Corporate

(Sep 2010)

Corporate

(Dec 2010)

Corporate (Mar

2011)

Corporate (Jul

2011)

Extremely likely

Somewhat likely

More or less

the same

Somewhat

unlikely

Extremely

unlikely

Banking and Financial Services most favoured sector to invest

23%

36%

18%

24% 25%27%

21%

2%7%4%

56%

15%

38%

10% 12%

6%

11%12%

0%

10%

20%

30%

40%

50%

60%

Automobiles Banking and

Financial

Services

Capital Goods FMCG Oil and gas IT & ITES Telecom Others Dont know/

refused to

answer

Retail Advisor

Fig. 8.2


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Page 40

Fig. 8.3 Investors want to retire at 55 to 60

Investors prefer financial advisors and personal network as sources of information

39%34%

3%

8%12%

1%1%2% Below 45

Age 45 to 50

Age 50 to 55

Age 55 to 60

Age 60 to 65

Age 65 to 70

Age over 70

Already retired

Can't say

12%

5%

8%

15%

24%

8%

11%

8%

18%

5%

11% 10%

13%

18%19%

7%

12%

7%9%

28%27%

24%

16%

8%6%

18%

25%26%

0%

5%

10%

15%

20%

25%

30%

Broker services Financial advisor Bank relationship

manager

News & financial

media

Online resources Personal network Personal research

Sep 2010 Dec 2010 Mar 2011 Jul 2011

8.3 Expected Retirement Age

The survey asked retail investors about their expected retirement age. The chart below depicts the percentage

break up of the respondents showing their expected age of retirement.

39% and 34% of retail investors have opted to retire in the

age 55 to 60and 60 to 65 respectively.

8.4 Preferred source of information

The survey asked retail investors about their preferred source of information for investment decision making. The

chart below depicts their responses to the preferred source of information for July 2011, March 2011, Decembe

2010 and September 2010.

19% of the retail investors prefer financial advisors while 26% prefer personal network as a source of information

Financial advisors preference rises 7 percent points to 19%.

Fig. 8.4


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8.5 Survey Structure

Retail investors, corporate investors and advisors were surveyed through a combination of face-to-face

interviews, online surveys (throughwww.valuenotes.com) and telephonic interviews. The surveys were conducted

in selected Indian cities - Delhi / NCR, Kolkata, Ahmedabad, Mumbai, Pune, Hyderabad, Bengaluru and Chennai.

The survey questionnaire for all categories of respondents consisted of three sections.

a) Screeners . The screener questions varied by respondent category to capture the profile of the

respondent.

1) For retail investors, screeners captured gender, location, sector/industry of employment

occupational status, age bracket, years of continuous investment experience, expected

retirement age, primary source of investment related information, regularity of saving for

investments, investment wallet size and investment activity over the past 12 months.

2) For corporate investors, screeners captured treasury size, years of treasury experience, fina

decision maker of treasury investments and treasury activity over the last 12 months.

3) For advisors, screeners captured the extent of distribution reach, financial products

distributed, extent of financial advisory services rendered and years of distribution / advisory

experience. Within banks, screeners captured ownership private, public and foreign.

b) Index questions six closeended questions used to compute the Confidence Index, posed to al

categories of respondents, as below.

1) In your opinion, what is the likelihood of the Indian economic situation improving from curren

levels in the next six months?

2) In your opinion, what is the likelihood of an improvement in the general Investment marke

environment and atmosphere from current levels in the coming six months?

3) In your opinion, how likely is the possibility of the global economic environment improving

from current levels in the coming six months?

4) In your opinion, what is the likelihood of the BSE Sensex increasing in the next six months?

5) In your opinion, what is the prospect of your / your clients investment portfolio appreciating in

the coming six months?

6) Investors - Will you increase or decrease the amount of investment in the coming six

months? Advisors - Will you expect an increase in mutual fund inflows / new accounts in the

next six months?

The response options to all the six questions were: Extremely likely, Somewhat likely, More or less the

same as current, Somewhat unlikely and Extremely unlikely.

c) Other questions these varied by category of respondents.

1) All respondents were asked to name the biggest positive economic and negative economic

indicator in the current Indian economic scenario, their interpretation of long term when they

are recommended to make a long term investment and percentage of annual return expected

from an equity fund of investment horizon of above 3 years.
http://www.valuenotes.com/http://www.valuenotes.com/http://www.valuenotes.com/http://www.valuenotes.com/


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Fig. 8.5 Retail By cityFig. 8.6

Retail By occupation

1%

31%

62%

6% Professional

Self-employed

Salaried Employee-

Private Sector

Salaried Employee-

Governement

14%

13%

12%

12%12%

13%

12%

12%

Delhi / NCR

Mumbai

Kolkata

Chennai

Bengaluru

Pune

Hyderabad

Ahmedabad

2) Retail and corporate investors were asked for their opinion on the likelihood of their income

(NPAT for corporates) increasing over the next six months.

3) Retail investors and advisors were asked to take a call on what range the BSE Sensex would

be trading at, in September 2011.

4) Retail investors were also asked about their current investment strategy and how they

expected their strategy to change in the next 6 months.

8.6 Retail Investor Sample

The Investor Confidence Index reflects the sentiment of the retail investor from the selected cities. The sample

size is as follows:

Sample Size Methodology

Sample size for Retail Investor Confidence Index 1,623 respondents with a reasonable representation of large,medium and small investors.

Retail Investors Delhi / NCR - 206, Mumbai - 206, Kolkata - 200Chennai - 200, Bengaluru - 202, Pune - 205Hyderabad - 202, Ahmedabad - 202

A combination of face-to-face

random sampling, telephonic

Documents

JPMVN Investment Confidence Index July 2011