|
| Where is the Indian investor putting his savings? |
| Particulars |
2004 – 05 |
2003 - 04 |
2002 – 03 |
2001 -02 |
| Currency |
9.2 |
10.1 |
8.5 |
9.7 |
| Deposits |
39.4 |
42.9 |
41.5 |
39.4 |
| Shares and Debentures |
1.1 |
1.4 |
1.6 |
2.7 |
| Claims on Governments |
24.0 |
17.7 |
18.6 |
17.9 |
| Insurance Fund |
13.2 |
14.9 |
15.5 |
14.2 |
| Provident and Pension Funds |
13.2 |
13.0 |
14.3 |
16.1 |
| Gross Financial Savings |
100 |
100 |
100 |
100 |
| Source: Business Standard | | |
Key observations:
- The proportion of Indians that Invest into the Capital markets is less then 2%. This figure is bound to go up further.
- During the epoch Harshad Mehta boom the proportion of Indians who were invested into the equity markets was 13%.
- By 2010 the total Indian household savings will be US $ 410 billion. Even if 10% of that were to come into the stock market it would be an inflow of US $ 41 billion.
- The total assets with the Indian household are US $ 1 trillion. A 1% shift in favour of the equity class means an inflow of US $ 10 billion and a 10% shift indicates an inflow of US 100 billion. That is barely what the FII's have been able to put in till date.
- The comparable equity exposure figures in the developed nations are more then 50%. That is the primary reson those countries create policies that favour equity markets - at least they try to. Being in such predominent number the democratically elected governments would not do anything to disturb the equity investors.
- Most of the Indian households still prefer to slash away their money into Banks and other Government deposits.
- Indians shall be paying an estimated amount of Rs 100,000 crores as Insurance premium whereas the amount that they bring into the stock market is less then Rs 10,000 crores.
- Stringent regulations and transparent trading systems will help in attracting new Investors to this market.
- The Retail investors rather then the foreign investors will now lead the current rally. This belief is further reinforced by the constant flow of money into the mutual fund schemes of the various fund houses.
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The Indian markets will go up more on the basis of local flows rather then FII inflows. |
| Year |
2005(A) |
2006 (E) |
2007(E) |
2008(E) |
2009(E) |
2010(E) |
| Savings |
6,60,000 |
7,12,800 |
7,69,800 |
8,31,400 |
8,97,900 |
9,69,700 |
| Equity Inflows @1.5% |
9900 |
10,700 |
1,15,00 |
12,500 |
13,500 |
14,500 |
| Equity Inflows @ 5 % |
33,000 |
35,600 |
38,500 |
41,600 |
44,900 |
48,500 |
| Source: www.abnamro.com
Figures are in Rs crores. | | | |
- Total Household Savings in next 5 years estimated at Rs. 41,81,700 Crores
- Current allocation to Equities is less then 1.5% of the total household savings.
- Equities on tax adjusted basis is the best savings option
- If allocation were to rise to a modest 5% of savings, domestic inflows in equities will be staggering Rs 2,09,100 crores over the next 5 years
- Amongst all developed markets the percentage of household savings to equity is between 30% to 60%. Therefore to assume an exposure of 5% would be very much within the realm of possibility.
- Savings rate is estimated to grow in line with the GDP growth rate , which is estimated at 8% CAGR.
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