Direct equity has emerged as the largest asset class for investments in the ongoing fiscal with a growth of 29 per cent at Rs 34.39 trillion or Rs 34.39 lakh crore followed by fixed deposit and bonds, says a report.
The report by Karvy Private Wealth said the upward trend in direct equity is likely to continue with a compounded annual growth rate (CAGR) of 20 per cent over five years.
The projection is interesting as the Sensex lost more than 16 per cent from its March 2015 high and the volatility in the market is increasing with the developments in China and on the back of the rising interest rates in the US.
Fixed deposits and bonds were the second largest investment choices with a y-o-y growth of 13.10 per cent (Rs 33.26 trillion) and insurance retained the third position with annual growth of 16.85 per cent (Rs 23.59 trillion) in financial year 2015, the report said.
Individual wealth in financial assets has increased 19 per cent from Rs 134.7 trillion in FY14 to Rs 160.5 trillion in FY15 and is expected to more than double to Rs 326 trillion in five years. In contrast, the physical assets are expected to grow at a slower rate of 4.4 per cent CAGR for the next five years, the report said, adding physical assets de-grew 2.3 per cent to Rs 119 trillion during the period.
One of the key positive changes in FY15 was the trend reversal of fresh investments of household savings getting channelised more into financial assets (54 per cent) vis-a-vis physical assets (46 per cent).
In FY14, the trend was completely opposite with physical assets accounting for 65 per cent of fresh investments.
Physical assets saw subdued interest with the wealth held by individuals in physical assets coming down marginally in FY15 on account of reduction in prices of gold and precious metals and gems and also subdued activity in the real estate sector.
The report says with faster growth in equities and slower growth in gold, the coming decade is likely to witness a trend reversal between equity and alternate assets leading to the country broadly being in line with the global proportions in all asset classes.