jpmorgan asset management - valuenotes investment confidence index wave - vi, december 2010

J.P. Morgan Asset Management – ValueNotes Investment Confidence Survey – December 13th to December 26th, 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 Standard Template 2009.ppt


1

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



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



5

Survey Methodology: face to face, online and telephonic interviews

Screener questions capture respondent profile

Six „index‟ questions - capture respondents‟ confidence, over the next six

months

1) Improvement in the Indian economic situation

2) Improvement in the general Investment market environment and atmosphere

3) Improvement in the global economic situation

4) Increase in the BSE Sensex

5) Appreciation in personal/clients‟ investment portfolio

6) Increase in personal/clients‟ investments

Other sentiment drivers

Delhi

Ahmedabad

Mumbai Pune

Kolkata

Chennai Bengaluru

Hyderabad



6

Index Construction Methodology

Each Index question assigned a point between 0 and 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

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

0 50 100 150 200

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



7

Respondent Sample – Wave VI, December 2010

92.5% of retail investors invested in stocks and/or mutual funds over the last 12 months

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

(INR) 2 to 5 lakhs 5 to 10 lakhs 10 to 25 lakhs 25 to 50 lakhs 50 lakhs +

Retail 35% 31% 17% 11% 6%

Treasury size

(INR)

10 lakhs to 1

crore

1 crore to 50

crores

50 to 150

crores

150 to 500

crores 500 crores +

Corporate 4% 10% 10% 14% 62%

Category Retail Corporate IFAs

(Advisors)

Banks

(Advisors)

NRDs

(Advisors)

Number of respondents 1,671 51 254 20 21


8

Investor and Advisor Confidence, Wave VI, December 2010

- Key Findings



9

Investment Confidence Index (ICI) nears all-time high

Investment Confidence Index

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)



10

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 confidence highest in December 2010

Retail vs. Corporate vs. Advisors



11

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)



12

Advisors near-perfectly aligned; Recovery in Banks’ confidence

IFAs vs. Banks vs. N/RDs

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



13

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



14

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

Corporate confidence (Dec 2010)- 131.2 Corporate confidence (Sep 2010) -131.8

Corporate Confidence (Jun 2010) -134.0 Corporate confidence (Feb 2010) -130.7

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

Retail Confidence (Jun 2010) -151.7 Retail confidence (Feb 2010) -147.1



15

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 (Dec 2010)- 131.2 Corporate confidence (Sep 2010) -131.8

Corporate Confidence (Jun 2010) -134.0 Corporate confidence (Feb 2010) -130.7



16

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)

0

1

2

4

0 1 2 4

Feb 2010

Dec 2010

Unlikely to increase Remain the Same Likely to increase

Increase

Same

Decrease

60%

10%

2%

6%

7%

2% 0%

Increase / decrease in personal income

Inc

rea

se

/ D

ec

rea

se

in

am

ou

nt

of

inv

es

tme

nts

6%

69%1%

4% 1%

1%

11% 11%

7%

2% 0%



17

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.





18

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





19

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)



20

Corporates buoyant in their investment activity

Corporate investment activity in the past 12 months

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

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

*



21

Fixed Maturity Plans prove safe haven for corporates; MMFs suffer

Corporate investments in debt mutual funds in the past 12 months

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


22

Other sentiment drivers

- Sensex, economic signals, expectations on income



23

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

BSE Sensex

in December

2010

BSE Sensex

During the

survey

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



24

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



25

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



26

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%)



27

Inflation keeps the financial community anxious

Fears due to high government borrowing / high fiscal deficit subsides as the year progresses

September 2010

June 2010

December 2010

February 2010



28

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)


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Key investment influencers

- International markets, information sources, advisory services, capital

investments



30

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



31

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%)



32

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



33

Financial planning & advice most offered advisory service

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



34

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



35

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


36

Thank you


37

Annexure



Indices by city – December 2010 (Wave VI)

38

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

situation 169.8 167.5 162.4 170.3 156.2 184.4 165.9 167.3

Improvement in investment market

environment and atmosphere 162.6 168.0 151.0 161.7 148.1 174.1 150.2 167.5

Improvement in global economic

environment 161.6 165.1 147.3 158.6 144.3 181.0 158.2 140.0

Increase in BSE Sensex 165.0 164.2 155.8 157.5 145.5 180.2 150.5 164.0

Appreciation in investment

portfolio 166.7 162.7 140.5 158.4 144.5 181.2 151.0 164.3

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


situation 170.3 154.8 145.7 154.7 148.3 143.5 124.1 148.6




environment 131.3 127.4 124.3 118.8 125.0 124.2 105.6 134.7



portfolio 160.9 161.3 148.6 160.9 156.7 167.7 135.2 152.8




Indices by city – September 2010 (Wave V)

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September 2010




situation 172.4 169.1 158.4 176.3 162.5 158.3 177.9 170.1




environment 143.8 136.2 148.6 165.7 151.0 127.0 166.2 161.2



portfolio 152.2 165.4 147.1 159.4 150.0 155.9 151.7 165.9


September 2010




situation 148.4 160.9 143.3 176.7 160.6 153.0 145.0 169.4




environment 112.9 107.8 120.0 135.0 128.8 122.7 110.0 116.1



portfolio 162.9 178.1 156.7 170.0 157.6 166.7 187.5 171.0




Indices by city – June 2010 (Wave IV)

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June 2010




situation 156.3 155.5 161.5 165.4 143.8 149.5 157.8 165.4




environment 149.5 148.8 143.4 155.0 147.5 133.5 118.8 155.0



portfolio 153.6 150.2 146.3 159 147.3 144.1 105.8 159.0


June 2010




situation 150.0 145.0 148.3 148.4 159.4 162.9 165.0 160.0




environment 106.5 113.8 96.7 106.3 142.2 143.5 135.0 141.7



portfolio 151.6 147.5 155.0 151.6 148.4 135.5 130.0 138.3




Indices by city – February 2010 (Wave III)

41

February 2010




situation 154.8 165.5 137.0 176.4 151.9 158.3 136.9 169.8




environment 148.2 156.1 136.3 157.5 146.6 151.7 88.4 149.3



portfolio 159.0 165.7 134.4 164.2 155.8 146.9 62.1 141.0


February 2010




situation 140.6 145.0 156.7 153.3 167.7 178.3 158.3 178.3




environment 129.7 113.8 125.0 121.7 150.0 136.7 143.3 155.0



portfolio 148.4 147.5 153.3 156.7 137.1 138.3 145.0 141.7




Indices by city – September 2009 (Wave II)

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September 2009




situation 152.0 154.7 146.4 169.7 159.2 146.8 140.9 133.4




environment 139.5 147.0 134.5 159.5 160.1 131.8 119.0 128.5



portfolio 141.9 148.3 141.5 159.7 155.8 139.4 132.0 128.2


September 2009




situation 154.8 160.0 145.2 148.3 160.0 160.0 154.2 167.7




environment 127.4 134.4 133.9 126.7 143.3 145.0 158.3 162.9



portfolio 162.9 163.3 154.8 156.7 145.0 158.3 125.0 159.7




Indices by city – July 2009 (Wave I)

43

July 2009




situation 144.0 149.0 149.5 166.2 131.1 154.6 102.7 137.9




environment 133.9 132.0 141.8 156.3 126.6 139.9 96.5 133.7



portfolio 135.9 144.3 144.8 159.4 130.2 150.4 99.8 137.9


July 2009




situation 144.0 149.0 149.5 166.2 131.1 154.6 102.7 137.9




environment 133.9 132.0 141.8 156.3 126.6 139.9 96.5 133.7



portfolio 135.9 144.3 144.8 159.4 130.2 150.4 99.8 137.9




Indices – Overall

44

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



45

Survey Methodology

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.

Interviews - face-to-face, online and telephone – with investors and advisors in Delhi / NCR,

Kolkata, Ahmedabad, Mumbai, Pune, Hyderabad, Bengaluru and Chennai

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



46

Index Construction Methodology

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

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

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


47

Respondent Sample

- Retail, Corporate & Advisor



48

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



49

Retail respondent profile

1,671 retail investors from the selected cities surveyed



50

Corporate respondent profile

Treasury size represents investments excluding strategic equity holdings and hedging investments



51

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



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

jpmorgan asset management - valuenotes investment confidence index wave - vi, december 2010

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