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Individual Wealth In Financial Assets Expected To Double In 5 Years

Thursday, December 24, 2015
By Dominic Rebello

The total wealth held by individuals in India has grown by 8.9% to Rs 280 lakh crores. Individual Wealth in Financial Assets grew by 19% while that in Physical Assets de-grew by 2.3%. The individual wealth in Financial Assets has increased from Rs 134.7 lakh crore in FY14 to Rs 160.5 lakh crore and is expected to double to Rs 326 lakh crore in the next five years. The Physical Assets are expected to grow at a slower rate of 4.4% CAGR for the next 5 years. This was revealed by the Karvy’s 'India Wealth Report 2015' released yesterday.

The report undertaken by KARVY Private Wealth, the Wealth management arm of the KARVY Group highlights some interesting facts. According to it “Direct Equity has been the flavor of FY15 becoming the largest asset class of investments with a YoY growth of 29% (Rs 34,39,861 crore) overtaking fixed deposits and bonds. The upward trend in direct equity is forecasted to continue with a growth of 20% CAGR over the next 5 years. Fixed deposit and bonds managed to be the second largest investment choice with a YoY growth of 13.10% (Rs 33,26,429 crore) and insurance retained the 3rd position with a YoY growth of 16.85% (Rs 23,59,790 crore)”.

India has been considered as the ‘Next Big Emerging Economy’ with its GDP expected to outpace that of China for the next decade, due to the changing positive dynamics within India. One of the Key positive changes in FY15 has been the trend reversal of fresh investments of household savings getting channelized more in financial assets (54%) vis-a-vis physical assets (46%). For the FY14, the trend was completely opposite with physical assets accounting for 65% of fresh investments.

The Global HNI wealth grew by nearly 12% in 2014 to reach a total of USD164 trillion, out of which Asia accounted for USD47 trillion. India emerged as the key driver in FY15 with its HNI wealth increasing by 28% on the back of a robust GDP growth rate of 7.3%.

However, physical assets saw subdued interest with the wealth held by individuals in physical assets reducing marginally in FY15, on account of reduction in prices of gold and precious metals and gems and also subdued activity in the real estate sector. The physical assets are expected to grow at a slower rate of 4.4% CAGR for the next 5 years to reach a level of Rs 148 lakh crores.

According to the report “In assets like debt and real estate, individual wealth in India is in line with the Global proportions. However, with faster growth in equities and slower growth in gold, the coming decade is likely to witness a trend reversal between equity and alternate assets leading to India broadly being in line with the Global proportions in all asset classes.”

Key Highlights

  • The total wealth held by individuals in India has grown by 8.9% to Rs 280 Lakh Crore Individual Wealth in Financial Assets grew by 19% while Physical assets de-grew by 2.3%.
  • The individual wealth in Financial Assets has increased from Rs 134.7 Lakh Crore in FY14 to Rs 160.5 Lakh Crore, which is a growth of 19% and KARVY Private Wealth forecasts that this will double to Rs 326 Lakh Crore in the next five years.
  • The individual wealth in Physical Assets actually decreased by 2.3 % to Rs 119 lakh crores due to degrowth in gold, silver & platinum and a small-down in the real estate market.
  • FY15 has seen an important trend reversal in the fresh investments of household savings, getting invested more in financial assets (54%) than physical assets (46%). For FY14 the trend was completely opposite with physical assets accounting for 65% of fresh investments.
  • Gold and real estate together form approximately 92% of the physical wealth in India.
  • Alternate assets and mutual funds will grow the most over the next five years with a faster rate of growth of about 44% and 29% per annum respectively.

Our 2014 prediction that Direct Equity would become the single largest asset class contributing to individual wealth in India in the year ending March 2015 came true. This year our projection is that the individual wealth in financial assets will double over the next five years and mutual funds & alternative investments will top the table in terms of growth rates’.
— Abhijit Bhave, CEO, KARVY Private Wealth

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