Long term trend of Financial assets in India
Indians are fairly conservative when it comes to equity investments and mutual funds. A fairly large percentage of population considers real estate, fixed deposits and gold as the go-to investments and will run the other way from equities and to a lesser extent from mutual funds.
But is the situation improving? Will we see more participation from more of the populace? What does it mean for the stock market over the long term.
(Long term - “How long is long term ?” is a common question that i see. People have many interpretations of what long term is. My definition of long term is > 5 years)
Let us try and answer this via a few simple charts below.
Exhibit A: Credit Suisse 2018 global wealth report
Snapshot from Credit Suisse global wealth report 2018 for India - USD per adult
There are two clear positives
There is a general trend towards financial assets away from real assets. (Whether that is a good sign is debatable given the way the banks are being run)
The Debt load that the average Indian carries as a percentage of overall net-worth is small (11% of gross assets) compared to the global average.
Exhibit B: Mutual fund inflows
AMFI - mutual fund inflows
Mutual fund inflows is a very good indication of the move towards financial assets. (except maybe in bear markets - when it is generally reversed)
Exhibit C : Working age population
Working age population comparison
The so called “demographic dividend” is a positive for India but I probably need to add a caveat around the government’s ability to create policies that are conducive to allow the country to reap this dividend.
Exhibit D : Urbanisation
Increased urbanisation is generally viewed as a positive because it leads to
Better efficiencies
Increased production
Increased consumption
Convenience
Better access to services
All of these factors bodes well for the market.
So in conclusion, the Indian market definitely has a lot going for it. So if you are in it for the long run, I am sure you will reap good rewards. Remain patient, be invested and follow your FIRE principles.
References:
https://www.amfiindia.com/research-information/mf-history
https://blogs.thomsonreuters.com/answerson/indias-demographic-dividend/
https://www.statista.com/statistics/271312/urbanization-in-india/