The total wealth held by individuals in India rose 8.5 per cent to Rs.304 lakh crore in the financial year 2015-16 and is expected to further increase to Rs.558 lakh crore over the next five years, according to the latest India Wealth Report 2016 by Karvy Private Wealth.
According to the study, individual wealth in physical assets stood at Rs.132 lakh crore, having grown 10.32 per cent in FY16 compared to a two per cent decline in FY15. Gold accounted for 49.83 per cent share among physical assets, followed by real estate at 41.94 per cent and diamonds at 6.07 per cent.
Among financial assets, Indian individuals preferred the safe avenues of fixed deposits and bonds with a 21.40 per cent share followed by direct equity (17.23 per cent), insurance (14.81 per cent), savings deposits (12.55 per cent) and cash (9.67 per cent).
While India is considered to be the bright spot among emerging economies, in the short term, the economy is bound to slow a bit given the government’s recent efforts to demonetise old high-value notes.
Further, the victory of Donald Trump in the U.S. presidential elections is also likely to result in some bumps in the road ahead for global markets and accordingly to the Indian market, it says.
Outshine peers
However, India is expected to outshine its emerging market peers, including China, in the long run owing to changing positive dynamics, especially the government’s reforms push like Goods & Services Tax (GST), and Real Estate (Regulation and Development) Act.
Demonetisation will have a long-term positive impact as more wealth would enter the formal financial system that might make savings bank deposits and fixed deposits among others to be the most sought after investment avenues. On the other hand, the proportion of investments in physical assets such as gold will reduce.
Bucking the trend of a fall in the equity markets, wealth held in mutual funds grew by 13 per cent indicating a clear preference of investors moving towards professional management of wealth.
Along the journey for a ‘less-cash’ economy, High Networth Individuals (HNIs) may also be attracted to options such as Bitcoins, once the regulatory picture is clearer in India, it says.
