Forty four per cent of the investors and advisors said the Sensex will breach the 20,000 mark by December even though it is currently trading in the 16,000-range, says a survey by J P Morgan Asset Management-ValueNotes.

The survey report called “Investment Confidence Index” for the quarter ended July reveals that the outlook of all the three investor categories – retail, corporates and advisors – has fallen, with the corporates' confidence falling the most.

Retail investors (48 per cent) and advisors (58 per cent) expect the BSE Sensex to trade between 19,000 and 21,000 in December 2011.

“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,” said the report.

Mounting inflationary pressure along with poor governance and corruption have been voted as the biggest negatives for the Indian economy, the report added.

Most confident

Of all the geographies where this survey was carried out, the Delhi/NCR displayed the highest level of confidence. However, the report said that the Independent Financial Advisors in Mumbai were the most “despondent of the lot and their confidence is the lowest this quarter.”

Overall, while retail investor confidence fell from what it was in the previous quarter, it was still the highest among all the investor categories. Advisor confidence came second and corporate confidence last.

Among the various demographics, the older investors aged between 60-65 years showed a surge in their confidence in the market during this quarter. Their confidence index was on par with that of the younger investors.

The report said that the participation of retail investors in mutual funds revived by 11 percentage points over the 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 per cent and 72 per cent respectively),” said the report.

A significant percentage of retail investors (39 per cent) and advisors (45 per cent) are expecting returns of around 10 – 15 per cent from equity fund schemes having a horizon of three years or more. Banking and financial services emerges as the most attractive sector for investment among retail investors (36 per cent) and advisors (56 per cent).

Also, at 26 per cent, the personal network continued to be the most preferred source of information for decision making among retail investors, said the report.

The report noted that about 50 per cent of the corporate treasuries were expected to maintain the current investment level in liquid funds ahead of RBI's regulation on limiting banks' exposure to liquid funds (effective from Jan 2012).

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