Financial assets are likely to grow at 16.99% CAGR over the next five years as compared to 9.34% for physical assets
Slowly but surely, Indian investors are turning away from gold and real estate and towards financial assets such as direct equity, mutual funds, bank deposits, bonds, insurance, etc. And this trend is likely to strengthen going ahead.
According to the India Wealth Report 2018 by Karvy Private Wealth, financial assets are likely to grow at a compounded annual growth rate (CAGR) of 16.99% over the next five years as compared to 9.34% CAGR for physical assets. The share of financial assets in individuals' wealth will increase to 67.98% by financial year (FY) 2022-23 from 60.22% in FY18. As against this, the share of physical assets will reduce from 39.78% to 32.022%.
Individual wealth is expected to double to Rs 762 lakh crore by FY23. Of this, financial assets are expected to touch Rs 518 lakh crore and physical assets will grow to Rs 244 lakh crore.
According to the report, in FY18, the total individual wealth in India saw a growth of 14.02% to Rs 392 lakh crore from Rs 344 lakh crore in the previous fiscal. Of this, financial assets grew 17.42% to Rs 236 lakh crore while physical assets grew 9.24% to Rs 156 lakh crore.
"Incrementally, more savings will go to financial assets than physical assets,'' said Abhijit Bhave, CEO, Karvy Private Wealth.
Direct equity grew 30.32%, mutual funds 34.5% and unlisted equity 36.83% in FY18. The share of these assets within individuals' wealth also saw an increase over FY17. The growth in savings bank deposits (7.39%), fixed deposits and bonds (7.69%) and current deposits (4.3%) was a drag, but that was also because of the base effect of demonetization in the earlier year, Bhave said.
However, currency circulation continued to be at an all-time high and it grew 39.2%. The share of cash as part of individuals' wealth increased to 7.45% in FY18 as against 6.28% in FY17.
The Sukanya Samriddhi Scheme, too, saw good growth of 56.26%, though the base was small. Similarly, instruments preferred by ultra-high net-worth individuals and high net-worth individuals also saw good growth, such as 33.46% jump in alternative investments and 25.84% rise in international assets.
Provident fund will also continue to see growth, said Bhave "as more people join the workforce. Post office deposit scheme is expected to do well because of the large reach. We also expect small savings schemes to grow over 10%.''
The report projects that over the next five years, direct equity will grow by almost double as compared to fixed deposits and bonds.
"This is the time for individual investors to be overweight on equities as there is a very high probability of the Sensex trebling. We believe a sustained bull run is in place, though returns from equity will be lumpy,'' Bhave said.
FORTUNES SOAR
- Share of financial assets in individuals’ wealth will rise to 67.98% by FY23 from 60.22% in FY18; share of physical assets will reduce from 39.78% to 32.022%
- Individual wealth may double to Rs 762 lakh crore by FY23. Of this, financial assets will be Rs 518 lakh crore
30.32% – Individual wealth grew in FY18
14.02% – Growth in direct equities
7.69% – Growth in fixed deposits and bonds
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