In its first Investment Confidence Index (ICI) on the domestic markets announced on Wednesday, JPMorgan Asset Management India found that the Indian financial community currently holds a cautiously optimistic view towards the local market.

Responses from retail investors indicate that investments in stocks and mutual funds increase with an increase in wallet size. While 37% of retail investors with wallet size between Rs 2 lakh and Rs 5 lakh invested in stocks and mutual funds over the past 12 months, the figure increased to 79% for investors with wallet size Rs 50 lakh and above.

The ICI done in association with Value Notes, one of the leading independent market research agency, found that both investors and advisors expect Sensex to be at 16,000 – 17,000 levels by December 2009. Nearly 76% of retail and 88% of advisors expect Sensex to rise from current (survey) levels. The survey, to be published on a quarterly basis, captured the confidence of retail investors, corporate investors and financial advisors on the Indian economic and investment environment.

According to the findings nearly 48% of retail investors expect their income will increase and they will make additional investments over the next six months. Retail investors are more confident about making additional investments (136.4) than their advisors (132.1) expect them to. Advisors are significantly more optimistic about portfolio appreciation (146.8) than their retail clients (138.2).

Among cities?retail and IFA confidence in Chennai is the highest at 160.2 and 147.3 respectively. In contrast, retail confidence in Hyderabad is lowest at 98.1 and IFA confidence is the lowest in Kolkata at 125.7. Retail investor confidence declines as age increases, with the age group 22 to 25 most confident (142.7) and investors aged 55 to 60 the least confident (131.3).

By occupational status, the salaried employees from the private sector have the maximum confidence at 140.8. About 70% of corporates expect improvement in profits and employment opportunities while half the corporates surveyed believe that the Indian rupee is likely to appreciate in the next six months while 76% of respondents expect interest rates to move upwards.

Close to 36% of corporate respondents expect RBI to intervene in the medium term to reduce liquidity in 6-12 months while 44% believe that the NPAs can be expected to increase, the study said further.

JPMorgan Asset Management executive chairman Krishnamurthy Vijayan said, ?We are extremely proud to present the JP Morgan Asset Management?ValueNotes Investment Confidence Index to the Indian investment community. Investment sentiment has always been a key focus in our business strategy across the globe. We have been monitoring retail investor sentiment closely within the major markets of Europe and Asia for some time by conducting investor confidence surveys since the early 1990s.?

According to ValueNotes managing director Arun Jethmalani, ?The Indian economic prospects drive confidence across the board. A government with a strong majority was viewed as the most positive economic signal. The Investment Confidence Index at the end of July 2009 stands at 135.9, arrived by taking an average of the Investor Confidence Index (highest at 138.3), Corporate Confidence Index (136.0) and the Advisor Confidence Index (133.5). A deeper study of the indices throws up a recurring theme across all three categories?consistently high levels of optimism on an improvement in the Indian economic situation. This is contrasted by a marked pessimism or significantly lower confidence on a global economic recovery.?

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. Going forward, the ICI will map and analyse the short term and long term changes in investment behaviour and outlook every quarter, from an investor and distributor standpoint, JP Morgan said further.