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  • Changing times, changing trends: Karvy’s India Wealth Report 2016

    Published on December 15, 2016

    Mumbai: KARVY Private Wealth, the wealth management arm of the KARVY Group, a leading financial-services conglomerate, launched its 7th edition of India Wealth Report 2016 today. The Report provides an overall perspective of the Wealth held by karvyindividual in India and the expected pattern of future investments. Based on extensive research, the report provides the annual buzz on “Wealth” trends for individual investors in India.

    Global private financial wealth grew by nearly 5.2% in 2015 to reach a total of $168 trillion (approx. ` 11,250 lakh crore), out of which Asia-Pacific accounted for $37 trillion (approx. `2,500 lakh crore). While India is considered the bright spot among emerging economies, in the short term the economy is bound to slow a bit, given the government’s recent efforts to demonetise old, high-value notes. The victory of Donald Trump in the US presidential elections is also likely to result in some bumps in the road ahead for global markets and accordingly to the Indian market. However, in the long run, India is expected to outshine its emerging market peers, including China, owing to changing positive dynamics, especially the government’s reforms push (the Goods & Services Tax (GST), Real Estate (Regulation and Development) Act and the Bankruptcy Code, among others. Even demonetisation will have a long-term positive impact, as more wealth enters the formal financial system. Thus, we expect savings bank deposits, fixed deposits and small savings schemes to be most sought after investment avenues even for the next year and in the long run, this wealth will eventually find its way into asset classes such as equities, mutual funds, etc. On the other hand, the proportion of investments in physical assets such as gold and real estate will reduce.

    In FY16, total wealth held by individuals in India grew by 8.5% to ` 304.2 lakh crore. Investments in financial assets too grew, although at a slower 7.14% to ` 172 lakh crore, mainly dampened by the bleak performance of direct equities. Physical assets grew at a much faster 10.32% to ` 132 lakh crore.

    Total individual wealth in India 2016

    In FY16, Fixed deposits and Bonds reversed positions with Direct Equity to become the most preferred financial asset. Insurance retained the third spot, while all other classes gained marginally over FY15.

    The government’s effort to demonetise old, high-value notes will ensure that wealth in some idle non producing assets to the tune of `14 lakh crore will move into the formal financial system by way of bank deposits. 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.

    Classification of Individual Wealth in India based on Financial Assets

    Individual Wealth in physical assets stood at ` 132 lakh crore, having grown 10.32% in FY16 compared with a 2% decline in FY15. Individual wealth in gold stands at ` 65.90 crore having almost half the share, whereas wealth in real estate (excluding primary residences) come in second at ` 55.47 lakh crore. Gold and real estate together form nearly 92% of the physical wealth in India.

    Classification of Individual Wealth in India in Physical Assets

    screenshot_20161214_230740By FY21, overall individual wealth in India is expected to grow to ` 558 lakh crore from the current ` 304 lakh crore, at a CAGR of 12.90%. Financial assets are expected to grow at a faster pace of 14.73% CAGR to nearly double in this period. Direct equity is expected to grow at a more than a 20% CAGR over the next 5 years. It is expected to regain its position as the most preferred asset among financial assets. 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.

    In assets like debt and real estate, individual wealth in India is in line with global proportions, while in equity & alternate assets, the position is opposite to global proportions.

    On this occasion, Mr. Abhijit Bhave, CEO – KARVY Private Wealth said, “The Indian economy is in for some stormy changes in the short term amid events such as demonetization, Donald Trump’s victory and the possible fed rate hike. However we see the India growth story intact in the long term.

    Wealth in financial assets (direct equities, fixed deposits, alternate assets and mutual funds) is likely to grow considerably in the long run, and events such as demonetisation will also help reroute Indian investors wealth into these financial assets, Mr. Bhave said.

    Source : Sachin Murdeshwar