Individuals' investment in equity rose 30% in 2017-18, only 7% in FDs: Karvy report

In the last financial year, direct equities emerged as the preferred investment route for individuals in the country, overtaking traditional savings avenues like fixed deposits and bonds, says the Karvy India Wealth Report 2018.

This reverses the trend witnessed two years ago when fixed deposits and bonds cornered the highest share of wealth. Thanks to increased participation of retail investors, allocation to mutual funds grew 34.5% last year, with proportion of equity in mutual funds zooming to 67.9%.

According to Abhijit Bhave, CEO, Karvy Private Wealth, this trend is expected to sustain in the coming years. “The next five to seven years will be the time for equity to be the preferred asset class and investors can possibly treble their exposure in equities,” says Bhave.


Financial assets cornered more individual wealth
Individual wealth grew faster in 2017-18 at 14% compared to 11% the previous year

Category	Total amount (Rs cr)	YoY change (%)	Proportion (%)
Financial assets	236,34,730	17.42	60.22
Physical assets	156,10,118	9.24	39.78
Total	392,44,848	14.02	100

India’s allocation of wealth in equity is still low at 19% compared to nearly 31% globally. The report says the shift towards financial assets like equities, mutual funds and small savings instruments continues at a fast clip, with individuals moving away from physical assets, particularly gold.

Equity emerged as the preferred asset class
Individual financial wealth in the country is expected to double by 2022-23

Financial assets	Total amount (Rs cr)	YoY change (%)	Proportion (%)
Direct equity	48,97,574	30.32	20.72
Fixed deposits & bonds	42,09,745	7.69	17.81
Insurance	33,35,909	11.15	14.11
Savings bank deposits	30,96,806	7.39	13.1
Cash	17,59,712	39.2	7.45
Provident Fund	14,48,241	11.03	6.13
Mutual Funds	11,67,954	34.5	4.94
Unlisted equity	9,55,930	36.83	4.04
NRI deposits	8,19,725	8.26	3.47
Small savings	7,36,560	10.28	3.12
Pension funds	6,03,937	27.08	2.56
Current deposits	4,30,935	4.3	1.82
Alternative investments	1,24,073	33.46	0.52
International assets	26,027	25.84	0.11
Sukanya Samriddhi Scheme	21,602	56.26	0.09

The overall pace of wealth creation has improved from the previous year with individual wealth growing 14% to reach Rs 392 lakh crore in 2017-18. This was led by a 17.42% surge in growth of financial assets even as wealth in physical assets grew by a sober 9.24%. The report estimates that the share of financial assets in total individual wealth is expected to increase to 68% by 2022-23.


Real estate ruled among physical assets
Gold also garnered a large share of wealth, while silver fell out of favour.

Financial assets	Total amount (Rs cr)	YoY change (%)	Proportion (%)
Gold	7451305	8.85	47.73
Real estate	6956802	10.35	44.57
Diamond	838142	5	5.37
Silver	224276	-2.03	1.44
Platinum	7683	9.78	0.05
Other gems and jewellery	131911	24.61	0.85

While gold ETFs continued to lose shine, sovereign gold bonds found favour. Individual wealth in SGBs has increased from Rs 5,259 crore in 2016-17 to Rs 6,960 crore in 2017-18. Among small savings instruments, allocation to the Senior Citizen Savings Scheme grew by 44% over the previous year.

Proportion of wealth in equities rose sharply
Other key asset classes witnessed a fall during the same period.

Category	FY18 proportion (%)	FY17 proportion (%)
Equity	19.02	16.8
Debt (includes cash)	40.7	41.23
Alternate assets	22.55	23.65
Real estate	17.33	18.32

Allocation to Sukanya Samriddhi Yojana rose 56% to Rs 21,602 crore. The recent currency depreciation also saw a renewed interest in international investments which saw a jump of 25.83%. Among physical assets, real estate garnered 10.35% more of individual wealth over the previous year.