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Household savings invested in equity mkts at 8-yr high

Household savings invested in equity markets are at 8-year high. According to CNBC-TV18 analyst, Haresh Soneji, this is a very interesting trend; the 8-year high is in percentage terms. In absolute terms, they are at an all-time high at Rs 50, 000 crore, he informed.

He pointed that in terms of the percentage - household saving to gross household saving, it is At a 8-year high, at 6.4% of gross financial savings. In the previous bull-run, in year 2000, it was at 6.9%. But in absolute terms, that amounted to only Rs 16, 000 crore, Soneji informed.

He added that, in terms of all-time high, the household savings in equity at 9% in FY 94 were the highest-ever. So, in absolute terms, the markets are at absolutely high, but in percentage terms, they are getting at that high, Soneji said.

He picked up some other interesting trends – this Rs 50000 crore in equities and equity-assets has moved five-times in the last couple of years. This is provision fiscal year 2007, he reminded, adding that the information has been obtained from the RBI and CSO. This means, the investments have moved from Rs 10, 000 crore to Rs 50000 crore. This suggests that a lot of money has come into the markets from the households - small retail investors, Soneji said. This amounts to a little over 1% of the current total market capitalisation (about USD 1 trillion), he pointed out.

Another important statistics is the bank deposits have hit all time high of 55.6% in FY07, Soneji said. Experts and analysts say that last year interest rates were almost at their decadal high. Another interesting trend is that flows into pension & PFs show a declining trend; lowest ever at 9%, he added. This means that money is shifting or slowing down from pension funds and moving to bank assets, insurance and equity markets, Soneji interpreted.

Another interesting aspect, he said is that money is not entering equity markets directly; household investors have grown smart and they are pumping money into the equity market through the mutual fund route.

From the 6.4%, almost about 450-500 bps is invested through mutual funds only, he concluded.

Source: Moneycontrol.com