Individual investors investing in the Indian markets continue to move their wealth from physical assets such as gold and real estate to financial assets like equities and mutual funds. The annual India Wealth Report done by Karvy Private Wealth shows that the proportion of investments in financial assets expanded to 61% in FY19, against 57.25% five years ago. The share of physical assets came down from 42.75% to 39.05% in the same period.
According to the report, individual wealth in India is estimated to grow at a compounded annual growth rate of 13.19% over the next five years to reach a total of Rs 799 lakh crore. Direct equity, mutual funds and alternative funds will be the top growth drivers for financial assets over the next five years.
Despite the current mood in the market, investment made directly into the equity markets was the top investment avenue compared to other financial assets. However, investments in equity markets in FY19 grew at a slower pace of 6.4% over the previous year. “Direct equity continues to hold the fort in terms of investment preference in India,” said Abhijit Bhave, CEO, Karvy Private Wealth. Other notable assets which saw good growth include mutual funds, pension funds and alternative investments, according to the report.
The benchmark equity index, Sensex, recorded gains of 17.08% in FY19, leading investors to raise their investments in Indian stocks. Mutual funds as an asset class also grew in popularity in FY19 with a net inflow of `92,693 crore across equity and debt funds, according to data from Amfi.
While equity investments saw the highest allocation of resources from individual investors, investments in pension funds, mutual funds and alternative investment funds (AIFs) witnessed the highest growth. AIFs saw a growth of 20.19% year-on-year (y-o-y) with investments amounting to Rs 1.4 lakh crore in FY19, while pension funds and mutual fund investments grew 21% and 17%, respectively, over the previous year.
The country’s high net worth individuals (HNIs) – which Karvy Private Wealth categorises as individuals having an investible surplus of `5 crore and above – have increased their investments in AIFs. Of the several categories of alternative funds, HNIs have invested the maximum in structured products like market-linked debentures (MLDs) and private equity funds, leading individual wealth in alternative assets grow by 20.19% in FY19.
“Private equity funds have turned to be a preferred investment class globally and some family offices have begun making direct private equity investments or co-investments along with these funds,” said Bhave. HNIs invested `36,266 crore in private equity funds, a y-o-y increase of 54.7%.