Equities Lead the Charge for Wealth Creation: Karvy’s India Wealth Report 2017

MUMBAI:
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.
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.
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.