Business and investor confidence in India has dipped to its lowest level since January 2005, reveals a survey by leading think tank National Council of Applied Economic Research (NCAER).
"The Business Confidence Index (BCI) for April-June 2006 decreased by eight per cent over its previous round, and reached 141, which is the lowest since January 2005," said the NCAER report released on Saturday.
The quarterly comparison of BES shows that as compared to 2006 and 2005, BCI in the first quarter (April-June) of this year has dropped by about 1.6 per cent.
The drop has also been the steepest NCAER said.
"This is the steepest fall since Round 49 (July 2004). The downward movement in BCI reflects mainly the recent shocks in the capital market and a general uncertainty in the economy, partly influenced by high oil prices and the rise in the prices of primary articles," the report stated.
The result is market sentiments are still to revive and there has been no fresh issue in the last one month.
The report noted that investors' interest in making investments in stocks had declined substantially in the last two months since the market has been in turmoil.
The 30-share sensitive index has declined 2,000 points during this period, closing at 10,500 in the recent past (June 13-16).
"The fact is that almost all the issues that have hit the market since April 2006 are being quoted on a discount. Out of the 25 companies that went public since April 2006, only five are being quoted above their offer prices," the report said.
The NCAER study pointed out that the ratings of the macroeconomic indicators such as overall economic conditions and the investment climate dropped by 12.4 and 4.3 percentage points respectively over their levels in the previous round.
Among the firm-level indicators, expectations regarding the financial position declined (minus 4.0 per cent), while capacity utilisation showed a mild dip.
While there has been a drop in expectations across all the sections, the highest has been in the capital goods (minus 13 per cent), followed by intermediates (minus 8.0 per cent) and consumer non-durables (minus 6.0 per cent).
The services sector, considered the engine of growth, too has receded by five per cent over its previous round. The least decline in expectations is noticed in the consumer durables sector (minus 1.4 per cent), the report states.
Across the various regions, barring the east all others have shown a declilne in business sentiment, with as much as 17 per cent in the case of west and north regions and around four percent in the south.
Across size of business, the sentiment declined steeply for the top category of firms.
On the positive side, the report shows "over the next six months, the firms expect to hire more permanent workers and skilled workers. This may suggest that firms are taking a long-term view of the requirements for business despite the poor outlook on investment at this time."