There’s new evidence that market expectations in India had become unreasonably high. In a survey conducted for the ING Investor Dashboard Sentiment Index for Q2 of the current calendar year, Indian investors were found to be the most optimistic in the region, followed by China.
The India index was found to be the only one in the region classified as “very optimistic”. About 76% of the investors in Q2 of 2009 believed that their personal financial situation has improved against 41% in Q1 of 2009, while 84% Indian investors considered that the government policy on investment in Q2 2009 was favourable, against 47% in Q1 2009.
Small wonder then that the Budget led to a swift sell-off. Incidentally, caution was still the watchword when it came to the market, with the proportion of investors taking aggressive strategy for capital appreciation increasing from 10% in Q1 2009 to a not-so-high 21% in Q2 2009.
The survey says “84% of the Indian investors feel that the stock market will further rise in Q3 2009, reflecting bullishness and reinforcing the optimistic outlook for the next quarter. Incidentally, performance of the stock market is one of the most important criteria for investment decisions for Indian investors”. Nearly 93% of investors feel the economy will improve in the current quarter; and they intend to invest more, but not necessarily in equities. It says: “Given this scenario, 43% of Indian investors plan to invest more in Q3 2009. Gold and investment in real estate remain the popular tools for investment.” It would be interesting to know how the Budget has changed all this. With expectations so high, the scope for sell-offs, too, is very high.