Saturday, September 30, 2006

Where r Indians investing?

Looking at the fascination of the pink papers about them, your guess may be 'equities'! High proportion of disposable income, contained inflation and benign interest rates has facilitated Indians to grow their savings over the last couple of years. This is well reflected in the rise in the savings to GDP ratio (29% in FY06)

While the risk profile of Indian households has been traditionally low, the rally in stock markets and real estate has often caught their fancy. The latter is more justified given the fiscal incentive to it.

But there has been little change in the broader portfolio allocation. Despite the Sensex having multiplied 4 times in the last decade, the allocation to equities has merely grown from 4.5% of total household assets to 5% in the same period. It is also interesting to note that the same was 3.3% four decades back

The risk averseness is also evident from the fact that Bank FDs (47%) and tax saving schemes like the PPF (10%) continue to enjoy a higher allocation in the Indian investors' portfolio

While statistics reveal that equity as an asset class outperforms all other asset classes over the longer term, the investor needs to ask himself / herself a few questions

  • Whether you have an investment plan?
  • Whether you are saddled with an incompetent advisor?
  • Whether your investments are lop-sided?
  • Whether you lack discipline?

Indians are not over-invested in equities for sure! This, however, offers them a very feasible investment opportunity, if done with the correct perspectives.
Post a Comment