Soaring inflation and market volatility notwithstanding, Indian investors have emerged most optimistic in Asia and many of them believe the economy has improved in the second quarter of 2008, says a survey.
According to a survey conducted by Dutch financial services major ING, 76 per cent of Indian investors believe the economy would improve in the third quarter while 71 per cent felt that economy had improved in the second quarter.
"Despite market volatilities, rising oil prices and inflation, the ING Investor Dashboard Sentiment Index for India continues to reflect highest level of investor optimism across Asia. ...a lot more investors claim that the economy has improved in the last quarter," the survey conducted in association with research and analysis provider TNS said.
India's investor sentiment slipped three per cent to 163 for the second quarter from the first quarter of 2008.
In Asia Pacific region, India is followed by Hong Kong (123) and China (117) at the 2nd and 3rd places, respectively.
About 72 per cent investors expect return on investment to increase in Q3 compared to 63 per cent who think the return had increased in Q2. Nearly 68 per cent respondents in India expect their personal financial situation to improve in Q3.
"Overall investor sentiment in Asia falls 13 per cent for Q2 from Q1 in 2008 as global economic slowdown continues and regional political developments weigh on investors," it said.
Indian and other Asian investors seem to be "fairly optimistic" that markets would turn around in third quarter.
". . . the one thing going for India is that absolute growth rate of 7-8 per cent is still a great number, compared to the global average of about 4 per cent,. . . we may be slowing down slightly, economy is still expected to remain healthy," ING Investment Management India MD and CEO Vineet K Vohra said.
ING Investor Dashboard provides an investor sentiment index in Asia-pacific region and covers 13 markets, including Hong Kong, China, Taiwan and Korea.
As per the survey, 41 per cent of Indian investors expect inflation will continue to soar in Q3, while 69 per cent expect the price rise to affect investment decisions.
"About 75 per cent of Indian investors are considering reallocating their portfolio and invest more for higher return to hedge against growing inflation," the report said.
Investors are especially keen on investing in properties as an investment tool to beat inflation, with 54 per cent of them planning to reallocate their portfolios into realty.
Stocks (37 per cent), gold (29 per cent) and mutual funds and unit trusts (27 per cent) are also favoured by investors.
"We are witnessing a shift in investors' investment patterns - while they have increased their cash holdings and property investments, exposure to global markets seem to be finding favour with the investors as they reduce allocation to traditional domestic investment instruments," Vohra added.
However, about 47 per cent of investors in the country anticipate inflation to remain unchanged in the third quarter.
The survey showed that the proportion of Indian investors feeling the effect of the sub-prime crisis on their investment has declined from 52 per cent in the second quarter as against 59 per cent in the first quarter of this year. Still, the proportion is higher than six months back when the figure stood at 14 per cent in fourth quarter of 2007.
Moreover, about 61 per cent of Asian investors (excluding Japan) expect inflation to rise in the third quarter too while 81 per cent anticipate the same to affect their investment decisions during the same period.