Household investments in equities could touch $20 billion annually during the next three fiscal years, amid the ongoing structural shift in their savings, according to a Deutsche Bank report. “We estimate that in an optimistic scenario, households’ annual buying of equities could average USD 20 billion/year between 2017-18 and 2019-20, two times annual average inflows into equity mutual funds over the past three years,” the global financial services major said.
As per the report, an unprecedented wave of inflows into domestic equity mutual funds has been witnessed over the past three years and the trend is “set to intensify further”. The report noted that the architecture of the financial savings of households is undergoing a structural shift and the rising share of financial savings would help boost domestic liquidity and ease the rates environment.
Besides, raise financial capital productivity; lower hurdle rates for capital-intensive projects; it would unshackle the entrepreneurial drive of small and medium enterprises/self-employed businesses and stimulate debt-driven discretionary consumption demand.
During 2015-16, the share of equities and debentures in total financial assets moved up to 8.6 per cent from a low of negative 0.4 per cent in 2008-09. Official data on standalone equity penetration is not readily available. The report estimates a record-high level of 12 per cent of net financial assets going forward.
Further, Deutsche Bank noted that the mid-caps should attract a disproportionate amount of funds from domestic institutional investors and should continue to outperform large-cap indices. Mid-cap stock like CESC, Petronet LNG, Shriram Trans Fin, UPL are top picks for investments.
“Predominantly wholesale-funded banks/financials, such as Yes Bank, Shriram Trans Fin, are likely to be key beneficiaries of high liquidity environment,” the report said. “In addition, debt-funded discretionary consumption should also get a boost from higher liquidity,” it added.