In 2016, fixed deposits beat equity, insurance to emerge as most preferred financial asset

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New Delhi | Published: December 15, 2016 6:09:58 AM

Fixed deposits emerged as the most preferred financial assets in India in FY16, followed by equity and insurance, Karvy said in a report.I

Fixed deposits emerged as the most preferred financial assets in India in FY16, followed by equity and insurance, Karvy said in a report.Individual wealth in fixed deposits rose almost 11% to 36.8 lakh crore in FY16, it said.

In FY16, total wealth held by individuals in India grew by 8.5 % to 304.2 lakh crore. Investments in financial assets grew, but at a slower 7.14% to 172 lakh crore, mainly dampened by the weak performance of direct equities. On the other hand, physical
assets grew at a much faster rate of 10.32% to R132 lakh crore.

The report elaborates on the overall perspective of the wealth held by individuals in India. Besides, it also provides information on the expected pattern of future investments.

Karvy Private Wealth, the wealth management arm of the Karvy Group, launched its seventh edition of ‘India Wealth Report 2016’ on Wednesday. Karvy Private Wealth CEO Abhijit Bhave unveiled the report at a press conference in Mumbai.

India is considered the brightest spot among emerging economies. In the short term, the economy is bound to slow a bit owing to the demonetisation of R500 and R1,000 notes. However, in the long run, the country is expected to outshine its emerging-market counterparts, including China, owing to changing positive dynamics, especially the government’s reforms such as the GST, Real Estate (Regulation and Development) Act and the Bankruptcy Code, among others, the report added.

Bhave believes that demonetisation will have a long-term positive impact, as more wealth enters the formal financial system. “The Indian economy is in for some stormy changes in the short term amid events such as demonetisation, Donald Trump’s victory in the US presidential election and a possible rate hike by the US Fed. However, we see the India growth story intact in the long term,” Bhave said.

It is expected that through bank deposits, funds will move into the financial
system.

In the long run, these non-producing assets will move to producing assets and some of this will be invested in financial assets such as equities and mutual funds.

By FY21, overall individual wealth in India is expected to grow to R558 lakh crore from the current R304 lakh crore, at a CAGR of 12.9%. For HNIs, alternate asset classes such as private equity funds and venture capital funds will continue to hold interest.

“Along the journey for a ‘less-cash’ economy, HNIs may also be attracted to options such as Bitcoins, once the regulatory picture is clearer in India,” added Bhave.

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