Investor sentiment in India highest in Asia: ING

Investor sentiment in India has been the highest among the Asian economies in the January-March period of 2010 on the back of robust domestic consumption and expectations of increased stock market activity, a survey has said.

According to the 'ING Investor Dashboard Survey', the India index, which provides market insights into investor attitude and outlook, has jumped to 174 for the first quarter of 2010, from 169 in the immediate previous quarter.

The index also allows each market to be benchmarked and tracked against the overall investor sentiment across Asia.

Improved sentiment came on the back of increase in growth optimism, improvement in pessimism about inflation, strong domestic demand and confidence in the local stock market, the survey by global financial services group ING said.

"Given that the global economy has stabilised and is entering a period of weak growth and risk of a double dip recession in the US has abated, investors are recommended to look into consumer, capital goods, construction and infrastructure sectors to capitalise on the domestic growth prospect," ING Investment Management India MD and CEO Navin Suri said.

The overall pan-Asia (excluding-Japan) investor sentiment index remained at the higher level of 145 for Q1 of 2010, lower marginally from 147 in the previous quarter (October-December), showing that investors were optimistic about the future economic environment after the financial crisis.

The survey found that a majority of Indian investors (91 per cent) believe the economic situation will improve in the next quarter, signalling continued confidence in the local economy. Also investors are willing to take more risk as the economic outlook turns bullish.

Besides, a good 60 per cent of Indian investors plan to increase their exposure in the local stocks, mutual funds and other equity linked products in the next quarter. They are also bullish on the country's property market.

"We expect volatility in the markets driven by gradual stimulus roll back, rising inflation, interest rates, and some disappointments in sectoral earnings. Given the significant component of FIIs inflow, any global event that decreases the risk appetite could also result in significant volatility in the markets," Suri said. The survey showed marked improvement in pessimism related to inflation and food inflation among India investors.

"Inflation is dependent on supply-side factors, namely agricultural conditions, capacity utilisation, international commodity prices and food. Food prices, which are the major contributor to high levels of overall inflation, will continue to remain high," he added.