Equities lead the charge for wealth creation: Karvy’s India Wealth Report 2017

Author(s): 
Chandigarh, December 13, 2017: KARVY Private Wealth, the wealth management arm of the leading financial-services conglomerate KARVY Group, launched its 8th edition of India Wealth Report 2017 today. The Report provides a holistic view of the Wealth held by individuals in India and the future investment patterns. Based on extensive research, the report is a big draw among individual investors in India for predicting the future “Wealth” trends.

Global private financial wealth grew by 8.2% in 2016 to reach $63.5 trillion, against a growth rate of 4% in 2015. After close to a decade of economic slump, global economy is on a recovery mode. While US recorded a GDP growth rate of 3% in July-September period, China is estimated to grow at 6.8% in 2017. Amid such optimism, Indian economy is also showing signs of a turnaround after a temporary blip owing to various structural reforms.

 

Measures such as demonetisation, implementation of GST, RERA and the new Insolvency and Bankruptcy Code have changed the ways of doing business in India. This has led to more informal sectors coming under the fold of formal economy along with increasing preference for financial assets over physical assets. Going ahead, we expect this trend to continue over next 5 years with direct equity, mutual funds, fixed deposits, insurance and pension funds contributing a larger portion of overall asset pie. On the other hand, despite contraction of physical assets base, real estate is likely to become the most preferred physical investment option for Indians in coming years.  

In FY17, total wealth held by individuals in India grew by 11% to Rs 344 lakh crore on the back of stellar performance of direct equity asset class. According to the report, the wealth held in financial assets by Indian individuals has seen a substantial rise in FY17 growing at a rate of 14.63% to Rs 204 lakh crore. This is a significant trend reversal from previous year when physical assets had an upper hand over financial assets in terms of growth rates. Interestingly, once risk averse individual investors are also embracing direct equity as a lucrative investment option in their bids to beat inflation and garner high return.

 

Table 1: Total Individual Wealth in India in FY17

Category

FY 17 Amount

( Crore)

FY 16 Amount

( Crore)

YoY Change

Proportion

FY 17

Proportion FY16

Financial Assets

2,03,90,576

1,77,88,216

14.63%

59.27%

57.35%

Physical Assets

1,40,09,717

1,32,26,838

5.92%

40.73%

42.65%

Total

3,44,00,293

3,10,15,054

10.91%

100.00%

100.00%

 

Over 66% of individual wealth in financial assets was held in direct equity, fixed deposits, insurance and saving bank deposits in FY17. Meanwhile, wealth in direct equity grew by 26.80% in FY17 against a 13.84% fall in FY16. Direct equity now holds 18% of total wealth pie of individual financial wealth in India.

 

In FY17, assets under management (AUM) of mutual funds surged by 39.21% against a growth rate of 12.95% in FY16. This was majorly attributed to positive performance of equity market and increased contribution from the individual investors. Saving and current deposits also posted growth rates of 27.85% and 39.72% respectively as cash inflow into the bank accounts surged post demonetisation.

Meanwhile, major drags to total individual wealth included cash, NRI deposits and small savings in FY17. All these asset classes had shown double digit growth on y-o-y basis in FY16.

 

 

Classification of Individual Wealth in India based on Financial Assets

Financial Assets

FY 17 Amount

( Crore)

FY 16 Amount

( Crore)

YoY Change

Proportion

FY 17

Proportion FY16

Fixed Deposits & Bonds

40,14,624

36,81,658

9.04%

19.69%

20.70%

Direct Equity

37,58,255

29,63,882

26.80%

18.43%

16.66%

Insurance

30,01,230

25,47,563

17.81%

14.72%

14.32%

Saving Deposits

27,60,811

21,59,478

27.85%

13.54%

12.14%

Cash

13,35,200

16,63,432

-19.73%

6.55%

9.35%

Provident Fund

13,04,316

11,51,027

13.32%

6.40%

6.47%

Mutual Funds

8,68,396

6,23,825

39.21%

4.26%

3.51%

NRI Deposits

7,57,200

8,26,727

-8.41%

3.71%

4.65%

Unlisted Equity

7,23,127

5,86,118

23.38%

3.55%

3.29%

Small Savings

6,67,613

6,58,596

1.37%

3.27%

3.70%

Pension Funds

4,75,227

3,92,682

21.02%

2.33%

2.21%

Current Deposits

6,10,931

4,37,262

39.72%

3.00%

2.46%

Alternative Investments

92,963

77,503

19.95%

0.46%

0.44%

International assets

20,684

18,462

12.04%

0.10%

0.10%

Total

2,03,90,576

1,77,88,216

14.63%

100.00%

100.00%

 

Individual Wealth in physical assets stood at Rs 140 lakh crore, having grown by 5.92% as against 10.32% recorded in FY16. Individual wealth in gold stood at Rs 68.45 lakh crore, which is close to half of the total physical assets base. Similarly, wealth in real estate came in second at Rs 60.25 lakh crore. Gold and real estate together form nearly 91% of the physical wealth in India.


 

Physical Assets

FY 17 Amt

( Crore)

FY 16 Amt

( Crore)

YoY Change

Proportion

FY 17

Proportion FY16

Gold

68,45,167

65,90,575

3.86%

48.86%

49.83%

Real Estate

60,25,206

55,47,254

8.62%

43.01%

41.94%

Diamond

7,98,240

8,02,840

-0.57%

5.70%

6.07%

Silver

2,28,916

2,01,169

13.79%

1.63%

1.52%

Platinum

6,998

6,452

8.46%

0.05%

0.05%

Other Gems and jewellery

1,05,190

78,548

33.92%

0.75%

0.59%

Total

1,40,09,717

1,32,26,838

5.92%

100.00%

100.00%

 

 

 

 

 

 

 

 

 

 

 

 

Table on Classification of Individual Wealth in India in Physical Assets:

In the next five years i.e by FY22, the pace of investing in financial assets will continue its growth momentum. Overall individual wealth in India is likely to nearly double to Rs 638.89 lakh crore, growing at a CAGR of 13.18% during this period. Financial assets will constitute around 63% of the total individual assets pie by FY22, pushing the contribution of physical assets further down to 37%. Within the financial asset class, direct equity will emerge as the biggest contributor of individual wealth.

In the physical assets space, Indians love for real estate will continue. Wealth held in real estate is likely to double to Rs 121 lakh crore over the next five years. This indicates a revival of growth in real estate sector in coming years on the back of increased transparency in regulations along with renewed focus on affordable housing segment. For HNIs, alternative asset classes will be a big draw in coming years with unlisted stocks emerging as the new growth spot.

On this occasion, Mr. Abhijit Bhave, Chief Executive Officer of KARVY Private Wealth said, “Equity has emerged as the favoured asset class in FY17 with individual investors cashing in on the current bull run of the equity markets. Apart from outperformance of equities, a host of structural reforms implemented by the Government are encouraging Indian individuals to hold wealth in financial assets. Going ahead, financial assets are likely to sustain their dominant position. We also see real estate sector seeing a turnaround in near future.”

Date: 
Wednesday, December 13, 2017