JPMorgan Asset Management - ValueNotes Investment Confidence Index Wave - VI, December 2010

J.P. Morgan Asset Management – ValueNotes
Investment Confidence Index – Wave VI, December 2010
…India‟s only Investor and Advisor focused sentiment indicator

J.P. Morgan Asset Management – ValueNotes Investment Confidence Survey – December 13th to December 26th, 2010

J.P. Morgan Asset Management Standard Template 2009.ppt

J.P. Morgan Asset Management – ValueNotes Investment Confidence Index

 Background

 Introduction to the indices

 Survey methodology

 Respondent profile

 Investor and advisor confidence – Key findings

 Investment activity – Retail investors and corporate treasuries

 Other sentiment influencers

1


Background

 The inaugural Investor Confidence Index was launched in the UK in the early 1990s

 Subsequently launched in Germany, France and other European countries

 In Asia, similar Investor Confidence Indices launched by the firm in Hong Kong, Japan and Taiwan

 The Hong Kong Investor Confidence Index has just completed its 17th wave (3Q 2010) and continues to evoke
much interest

 The J.P. Morgan Asset Management – ValueNotes Investment Confidence Index (ICI) was launched in India in
July 2009

2


J.P. Morgan Asset Management – ValueNotes
Investment Confidence Index

 The definitive indicator of investment confidence levels across key investment centers

 Focused on three important investor segments: retail investors, corporates and the advisor community
(distributors)

 Key objectives
– To quantify confidence in the investment environment
– To study investment behavior and sentiment over time based on key factors
– To evaluate trends in such behavior
– To study short-term and long-term changes in investment outlook

3


Quarterly indices tracking sentiment across the investment community

 Investment Confidence Index: A composite index reflecting the combined sentiment of retail investors,
corporates and distributors

 Retail Investor Confidence Index: Based on a survey of retail investors across India

 Corporate Investor Confidence Index: Based on a survey of corporate treasuries across India

 Advisor Confidence Index: Based on a survey of distributors of financial products
– Banks, National/Regional Distributors (N/RDs) and Independent Financial Advisors (IFAs)

4


Survey Methodology: face to face, online and telephonic interviews

 Screener questions capture respondent profile

 Six „index‟ questions - capture respondents‟ confidence, over the next six
Delhi
months
1) Improvement in the Indian economic situation
Ahmedabad Kolkata
2) Improvement in the general Investment market environment and atmosphere
3) Improvement in the global economic situation Mumbai Pune

4) Increase in the BSE Sensex Hyderabad

5) Appreciation in personal/clients‟ investment portfolio Bengaluru
Chennai
6) Increase in personal/clients‟ investments

 Other sentiment drivers

5


Index Construction Methodology
Indices constructed in a similar manner from the six “Index” questions posed to all

 Each Index question assigned a point between 0 and 200

Extremely Unlikely Somewhat Unlikely More or Less the Same as Current Somewhat Likely Extremely Likely

0 50 100 150 200

 All six Index questions carry equal weight

 Investment Confidence Index equally weights retail, corporate and advisor indices

 Advisor Confidence Index equally weights the Bank Confidence Index, N/RD Confidence Index and the IFA
Confidence Index

6


Respondent Sample – Wave VI, December 2010
 92.5% of retail investors invested in stocks and/or mutual funds over the last 12 months

IFAs Banks NRDs
Category Retail Corporate
(Advisors) (Advisors) (Advisors)

Number of respondents 1,671 51 254 20 21

City Delhi / NCR Mumbai Kolkata Chennai Bengaluru Pune Hyderabad Ahmedabad
Retail 12% 12% 12% 14% 13% 12% 12% 13%
IFAs 13% 12% 13% 13% 12% 12% 11% 14%
Corporate 22% 36% 6% 6% 12% 8% 6% 4%

Wallet Size
2 to 5 lakhs 5 to 10 lakhs 10 to 25 lakhs 25 to 50 lakhs 50 lakhs +
(INR)
Retail 35% 31% 17% 11% 6%

Treasury size 10 lakhs to 1 1 crore to 50 50 to 150 150 to 500
500 crores +
(INR) crore crores crores crores
Corporate 4% 10% 10% 14% 62%

7

Investor and Advisor Confidence, Wave VI, December 2010
- Key Findings

8


Investment Confidence Index (ICI) nears all-time high
 Investment Confidence Index stands at 146.3 in December 2010, up 0.9 points from last quarter

 Confidence 0.1 point lower than highest exhibited in September 2009 (146.4)

Investment Confidence Index

9


ICI holds steady across categories
 Advisor confidence sustains recovery to reach 147.2 points; increasing 11.8 points from its low in June 2010

 Retail confidence (159.5 points) witnessed a marginal drop (0.6 point) for the first time since July 2009

Retail vs. Corporate vs. Advisors

Retail confidence highest in December 2010

10


Fears of global economic worries recede
 Advisors (173) more optimistic than retail investors (153) and corporates (137) on increase in investments

 Indian economy still the biggest confidence booster among retail investors (168) and corporates (143)

11


Advisors near-perfectly aligned; Recovery in Banks’ confidence
 IFAs (146.9), Banks (147.5) and N/RDs (147.2) record similar confidence levels

 Banks‟ confidence level rebounds to 147.5 points, the highest across all advisor categories for the quarter

IFAs vs. Banks vs. N/RDs

12


Advisors confident of clients’ increasing investments
 Banks (165.0) more optimistic than IFAs (155.7) and N/RDs (157.1) of an appreciation in clients‟ portfolios

13


Realty / Infrastructure; steady confidence among employees & treasuries
 Retail investors from IT/BPO/Outsourcing (154) sector increase the most (26 points) in confidence

 Confidence among Retail investors from Retail and Hospitality sector highest (167) after seeing low of 117 in
February 2010

Retail confidence (Feb 2010) -147.1 Retail Confidence (Jun 2010) -151.7
Retail confidence (Sep 2010) -160.1 Retail confidence (Dec 2010)- 159.5

Corporate confidence (Feb 2010) -130.7 Corporate Confidence (Jun 2010) -134.0
Corporate confidence (Sep 2010) -131.8 Corporate confidence (Dec 2010)- 131.2

14


Pune investor confidence gets a shot in the arm
 Confidence among Retail investors in Pune rises a whopping 32 points to 176 as against 144 in June 2010

 Delhi/NCR is the second most confident city among both retail investors and IFAs; steady increase in
confidence over the year


Corporate confidence (Feb 2010) -130.7 Corporate Confidence (Jun 2010) -134.0
Corporate confidence (Sep 2010) -131.8 Corporate confidence (Dec 2010)- 131.2

15


Retail investors hopeful of an increase in income as well as investments
 Majority retail investors (69%) expect both income and investments to increase compared to the beginning of
the year (60% in February 2010)

4
Increase / Decrease in amount of

Increase
11% 11% 60%
7% 1% 69%
2 Feb 2010
investments

Same 6% 10%
4% 1% 6% 7%
1 Dec 2010

Decrease 2% 1% 2% 0% 2% 0%
0
0 Unlikely to increase 1 Remain the Same 2 Likely to increase 4
Increase / decrease in personal income

16


Younger investors more confident once again
 Age group 25 to 30 years most confident (164) followed by the age group 22 to 25 years (161) points

 Older investors‟ (age group of 60-65) confidence see a sharp decline (-15 points) over June 2010 to a year‟s low
of 140 points.


17


HNI investors sustain confidence
 Investors with wallet size INR 25 to 50 lakhs and INR 50 lakhs and above most confident at 162 points each.

 Investors with wallet size INR 2 to 5 lakhs (158 points) lowest on confidence yet again


18


Stocks Down; Mutual Funds Rise
 Investment activity in Stocks saw a dip this quarter by 8 percentage points to 68% while mutual funds gain 6
percentage points to reach 66%.

 Investment in Retirement & Pension Products (56%) took a beating this quarter; falling 13 percentage points.
Retail investment activity in the past 12 months

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

19


Corporates buoyant in their investment activity
 Investment activity increases for all investment instruments except debt mutual funds

 Debt mutual funds slip further, down to 90% as compared to 94% in September 2010
Corporate investment activity in the past 12 months

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

20


Fixed Maturity Plans prove safe haven for corporates; MMFs suffer
 FMPs increase 15 percentage points over the last quarter, record highest gain across all instruments for
December 2010

 Money Market Funds slump by 21 percentage points, all other instruments record highest investment activity
since July 2009

Corporate investments in debt mutual funds in the past 12 months

21

Other sentiment drivers
- Sensex, economic signals, expectations on income

22


Investors and advisors expect Sensex to reach 22,000 – 23,000 in June ’11
 Retail investors (68%) and advisors (85%) opine that the Sensex will trade at higher levels in June 2011

 Advisors (43%) and investors (23%) reckoned the Sensex would trade between 18,000 – 19,000 in December
2010 while it traded between 19,500 – 20,500
Advisors more confident of BSE Sensex trading at higher levels in June 2011

BSE Sensex
During the
survey

Retail investors and advisors conservative of BSE Sensex levels in December 2010
BSE Sensex BSE Sensex
During the in December
survey 2010

23


GDP Growth: Key economic driver in India
 Retail (20%), Advisors (49%) and Corporate (53%) consider GDP growth to be the most positive economic
indicator

 Corporate (12%) and retail (19%) investors consider good corporate results the second-most positive indicator

24


GDP Growth the strongest +ve economic indicator throughout 2010
 Resurgence in corporate profits not the most positive indicator for retail investors in December 2010

December 2010 September 2010

June 2010 February 2010

25


Corruption joins inflation as a confidence killer
 63% of corporates are most wary about inflation followed by 48% of advisors and 19% of investors

 Corruption a cause of concern for retail investors(19%) and advisors (16%)

26


Inflation keeps the financial community anxious
 Fears due to high government borrowing / high fiscal deficit subsides as the year progresses

December 2010 September 2010

June 2010 February 2010

27


Corporate profits to grow further
 81% of retail investors positive about a growth in their income in the coming 6 months

 Corporates upbeat (85%) of an increase in profits (NPAT) this quarter, increase 9%-points over last quarter
Retail Investor increase in personal income

Corporate treasuries in profits (NPAT)

28

Key investment influencers
- International markets, information sources, advisory services, capital
investments

29


Advisors recommend Brazil and China; retail investors prefer USA
 47% retail investors and 44% advisors express interest in international market investments

 Of the 47% retail investors, 24% favoured USA as their preferred investment destination, while of the 44% of
advisors, 56% would recommend China to investors

30


China preferred by all categories of advisors
 33% of IFAs, 45% of Banks and 52% N/RDs would recommend investing in destinations other than India

 China was the most preferred destination across advisors; NRDs (60%), followed by IFAs (47%) and Banks
(36%)

31


News and financial media least preferred source of information

 27% of retail investors favor Broker Services followed by personal network at 24% as their primary information
sources for making investment decisions

 A meager 6% of investors prefer news and financial media for their investment decisions

32


Financial planning & advice most offered advisory service

 Financial planning & advice (82%) and financial product advice (76%) are the top two services offered by
advisors

33


Small size treasuries will definitely undertake capital investments
 Large treasuries (INR 500 crores and above) least likely to invest in capital intensive projects in the next 6-12
months

Capital investment projects expected in the next 6 – 12 months

34


Investors still positive about increase in property prices
 Expectations of an increase in property prices have remained flat (74% - 78%) over the year

Increase in property prices in the next 6 months

35

Thank you

36

Annexure

37


Indices by city – December 2010 (Wave VI)
December 2010
Delhi/NCR Mumbai Kolkata Chennai Bengaluru Pune Hyderabad Ahmedabad
Retail Confidence Index 164.6 165.3 149.2 161.9 146.8 176.3 152.0 159.8
Improvement in Indian economic
169.8 167.5 162.4 170.3 156.2 184.4 165.9 167.3
situation
Improvement in investment market
162.6 168.0 151.0 161.7 148.1 174.1 150.2 167.5
environment and atmosphere
Improvement in global economic
161.6 165.1 147.3 158.6 144.3 181.0 158.2 140.0
environment
Increase in BSE Sensex 165.0 164.2 155.8 157.5 145.5 180.2 150.5 164.0
Appreciation in investment
166.7 162.7 140.5 158.4 144.5 181.2 151.0 164.3
portfolio
Change in amount of investments 162.1 163.9 137.9 165.0 142.4 156.6 136.2 155.6

December 2010
IFA Confidence Index 158.9 154.0 139.0 145.8 151.7 152.2 125.9 146.1
170.3 154.8 145.7 154.7 148.3 143.5 124.1 148.6
situation
154.7 151.6 131.4 134.4 146.7 148.4 129.6 138.9
131.3 127.4 124.3 118.8 125.0 124.2 105.6 134.7
environment
160.9 161.3 148.6 160.9 156.7 167.7 135.2 152.8
portfolio

38


Indices by city – September 2010 (Wave V)
September 2010
172.4 169.1 158.4 176.3 162.5 158.3 177.9 170.1
situation
165.8 168.7 153.1 170.8 158.6 152.9 179.4 167.2
143.8 136.2 148.6 165.7 151.0 127.0 166.2 161.2
environment
152.2 165.4 147.1 159.4 150.0 155.9 151.7 165.9
portfolio

September 2010
148.4 160.9 143.3 176.7 160.6 153.0 145.0 169.4
situation
143.5 151.6 150.0 165.0 163.6 156.1 155.0 161.3
112.9 107.8 120.0 135.0 128.8 122.7 110.0 116.1
environment
162.9 178.1 156.7 170.0 157.6 166.7 187.5 171.0
portfolio

39


Indices by city – June 2010 (Wave IV)
June 2010
156.3 155.5 161.5 165.4 143.8 149.5 157.8 165.4
situation
156.3 157.6 152.5 162.2 155.0 144.3 137.3 162.2
149.5 148.8 143.4 155.0 147.5 133.5 118.8 155.0
environment
153.6 150.2 146.3 159 147.3 144.1 105.8 159.0
portfolio

June 2010
150.0 145.0 148.3 148.4 159.4 162.9 165.0 160.0
situation
146.8 147.5 140.0 148.4 148.4 145.2 145.0 145.0
106.5 113.8 96.7 106.3 142.2 143.5 135.0 141.7
environment
151.6 147.5 155.0 151.6 148.4 135.5 130.0 138.3
portfolio

40


Indices by city – February 2010 (Wave III)
February 2010
154.8 165.5 137.0 176.4 151.9 158.3 136.9 169.8
situation
147.6 158.5 143.9 164.2 149.0 156.4 110.4 174.5
148.2 156.1 136.3 157.5 146.6 151.7 88.4 149.3
environment
159.0 165.7 134.4 164.2 155.8 146.9 62.1 141.0
portfolio

February 2010
140.6 145.0 156.7 153.3 167.7 178.3 158.3 178.3
situation
135.9 147.5 146.7 148.3 140.3 146.7 148.3 160.0
129.7 113.8 125.0 121.7 150.0 136.7 143.3 155.0
environment
148.4 147.5 153.3 156.7 137.1 138.3 145.0 141.7
portfolio

41


Indices by city – September 2009 (Wave II)
September 2009
152.0 154.7 146.4 169.7 159.2 146.8 140.9 133.4
situation
141.7 151.2 140.8 161.2 160.4 141.6 131.5 135.1
139.5 147.0 134.5 159.5 160.1 131.8 119.0 128.5
environment
141.9 148.3 141.5 159.7 155.8 139.4 132.0 128.2
portfolio

September 2009
154.8 160.0 145.2 148.3 160.0 160.0 154.2 167.7
situation
151.6 160.0 140.3 153.3 155.0 158.3 147.9 162.9
127.4 134.4 133.9 126.7 143.3 145.0 158.3 162.9
environment
162.9 163.3 154.8 156.7 145.0 158.3 125.0 159.7
portfolio

42


Indices by city – July 2009 (Wave I)
July 2009
144.0 149.0 149.5 166.2 131.1 154.6 102.7 137.9
situation
140.7 145.0 146.0 157.7 134.5 152.1 101.7 136.0
133.9 132.0 141.8 156.3 126.6 139.9 96.5 133.7
environment
135.9 144.3 144.8 159.4 130.2 150.4 99.8 137.9
portfolio

July 2009
144.0 149.0 149.5 166.2 131.1 154.6 102.7 137.9
situation
140.7 145.0 146.0 157.7 134.5 152.1 101.7 136.0
133.9 132.0 141.8 156.3 126.6 139.9 96.5 133.7
environment
135.9 144.3 144.8 159.4 130.2 150.4 99.8 137.9
portfolio

43


Indices – Overall

Jul 2009 Sep 2009 Feb 2010 Jun 2010 Sep 2010 Dec 2010

Retail 138.3 145.1 147.1 151.7 160.1 159.5

Advisor 136.0 151.7 145.9 135.4 144.1 147.2

Corporate 133.5 142.5 130.7 134.0 131.8 132.2

44


Survey Methodology
Interviews - face-to-face, online and telephone – with investors and advisors in Delhi / NCR,
Kolkata, Ahmedabad, Mumbai, Pune, Hyderabad, Bengaluru and Chennai
 Screeners to capture respondent profile
– Retail: Gender, location, age, occupational status, sector of engagement, liquid assets, investment activity in the past year
– Corporate: Treasury size, years of treasury experience and treasury activity in the past year
– Advisors: Extent of distribution reach, location (for IFAs)

 Six index questions to compute indices - respondents‟ confidence, over the next six months
– Improvement in the Indian economic situation, general Investment market environment and atmosphere, global economic
situation
– BSE Sensex increasing from current levels
– Prospect of self (retail and corporate) / clients‟ (advisors) investment portfolio appreciating and
– Increase / decrease in investments (self - retail and corporate, clients‟ – advisors)

 Other questions – primary source of investment information, new capital investment projects, types of financial advisory
services rendered, preferred investment destination, positive and negative economic indicators, likelihood of non-investment
income increasing, and range BSE Sensex will trade at in June 2011.

…current survey conducted between 13th December – 26th December, 2010

45


Index Construction Methodology
Three indices constructed in a similar manner from the six “Index” questions posed to all

 Each Index question assigned a point between 0 and 200
– Extremely likely - 200 points
– Somewhat likely – 150 points
– More or less the same as current – 100 points
– Somewhat unlikely – 50 points
– Extremely unlikely – 0 points

 All six Index questions carry equal weight
– Sub – indices computed for each Index question, weighted by number of responses
– Average of the six sub – indices is the overall Index for the category / segment / city

 The Advisor Confidence Index equally weights the Bank Confidence Index, N/RDs Confidence Index and the
IFA Confidence Index

…indices at any point, can range from “0” to “200”; 200 being the highest possible confidence

46

Respondent Sample
- Retail, Corporate & Advisor

47


Eligibility
 Retail
– Employees from media, advertising & marketing, PR, research and financial websites excluded
– Employees and immediate relatives of J.P. Morgan Asset Management and ValueNotes not eligible for participation
– Investment experience > 2 years
– Age >=22 and <=65
– >= INR 2 lakhs in wallet size
– Invested in stocks, mutual funds, bonds, foreign currency, certificate of deposits, warrants or derivative products in the last year
– Actively save for investments, whether regularly or once in a while

 Corporate
– Treasury size > =INR 10 lakhs
– Treasury experience >= 2 years

 Advisors
– Distribute financial products
– >= 2 years of experience in financial services
– N/RDs with nation – wide reach

48


Retail respondent profile
 1,671 retail investors from the selected cities surveyed

49


Corporate respondent profile
 Treasury size represents investments excluding strategic equity holdings and hedging investments

50


Advisor respondent profile
 Advisors include 20 banks, 21 National / Regional Distributors (N/RDs) and 254 IFAs from the selected
cities

 “Advisor” sentiment equally weighted across the three categories

51


Disclaimers / Risk Factors

 Statutory details: Sponsor: JPMorgan Asset Management (Asia) Inc. Trustee: JPMorgan Mutual Fund India Private Limited, a
company incorporated under the Companies Act, 1956. Asset Management Company: JPMorgan Asset Management India
Private Limited, a company incorporated under the Companies Act, 1956. JPMorgan Mutual Fund has been established as a Trust
under the Indian Trusts Act, 1882, by JPMorgan Asset Management (Asia) Inc., liability restricted to initial contribution of Rs.1
lakh.

 Risk Factors / Disclaimers: Mutual fund investments are subject to market risks. Please read the Offer Document,
Statement of Additional Information and Scheme Information Document carefully before investing.

 The information contained herein is provided based on a public survey. Although we endeavour to ensure that the information is as
current and accurate as possible, errors do occasionally occur. Therefore, we cannot guarantee the accuracy and adequacy of the
information. Readers should, wherever possible, verify the information before acting on it.

 This information is based on our assumptions and interpretations of the survey conducted. No part of our compensation was, is, or
will be directly or indirectly related to the specific recommendations or views expressed herein. Be aware that our assumptions and
interpretations are partially based on our observation of participants‟ past behavior. Do not base your actions on the material so
provided. These observations will change if different assumptions and interpretations are applied for the purpose of preparing this
survey report.



 Research Methodology

 Retail investors, corporate investors and advisors were surveyed through a combination of face-to-face interviews, online surveys (through www.valuenotes.com) and
telephone interviews. The surveys were conducted in selected Indian cities -Delhi / NCR, Kolkata, Ahmedabad, Mumbai, Pune, Hyderabad, Bengaluru and Chennai. The
number of responses to each question is multiplied by the respective confidence-level point and these are aggregated at each Index question level. Sub –indices are
calculated for each of these six Index questions, which is the arithmetical mean of the aggregates. The arithmetical mean of the sub –indices forms the Overall Confidence
Index for that respondent category. The Advisor Confidence Index gives equal weights to the Bank Confidence Index, ND Confidence Index and the IFA Confidence Index to
arrive at the overall advisor sentiment. The Confidence Index, at any given point can vary between 0 and 200. 200 denotes the highest level of confidence in improvement
from current conditions, 100 denotes a neutral sentiment and 0 denotes an extremely negative outlook.

 Accuracy or Adequacy of Information

 The information contained herein is provided based on a public survey. Although we endeavour to ensure that the information is as current and accurate as possible, errors
do occasionally occur. Therefore, we cannot guarantee the accuracy and adequacy of the information. Readers should, wherever possible, verify the information before
acting on it.

 Interpretations and assumptions which may differ from person to person

 This information is based on our assumptions and interpretations of the survey conducted. No part of our compensation was, is, or will be directly or indirectly related to the
specific recommendations or views expressed herein. Be aware that our assumptions and interpretations are partially based on our observation of participants‟ past
behavior. Do not base your actions on the material so provided. These observations will change if different assumptions and interpretations are applied for the purpose of
preparing this survey report.

 Reproduction of material is prohibited unless approval is taken

 Information provided in this survey report is with the intent that it be readily available for personal and public non-commercial use and may be reproduced, in part or in whole
and by any means, without charge or further permission from J. P. Morgan Asset Management. We only ask that –Users exercise due diligence in ensuring the accuracy of
the materials reproduced; J. P. Morgan Asset Management be identified as the source; and, the reproduction is not represented as an official version of the materials
reproduced, nor as having been made, in affiliation with or with the endorsement of J. P. Morgan Asset Management. Our Corporate logo may not be used for any purpose
without explicit authorization.

 Reproduction of material included in this survey report, in whole or in part, for the purposes of commercial distribution is prohibited except with written permission from J. P.
Morgan Asset Management. Through the permission granting process, J. P. Morgan Asset Management helps ensure individuals/organizations wishing to reproduce
materials for commercial purposes have access to the most accurate, up-to-date versions. To obtain permission to reproduce materials on this site for commercial purposes,
please contact: Head –Marketing and Communications, JPMorgan Asset Management India Private Limited, Kalpataru Synergy, 3rdFloor, West Wing, Santacruz –East,
Mumbai –400 055 Tel: +91 22 6783 7202


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