Mutual funds have created more durable wealth for Indian retail investors and within a shorter time frame, than direct stock investments. Yet, the contribution of this vehicle to wealth creation and the change in household savings habits seems underappreciated.
Wealth Effect
Assets of the Indian mutual fund industry stood at Rs. 50.7 lakh crore in end December 2023, data from the Association of Mutual Funds of India shows.
About 59 per cent of this belonged to individual investors, taking their wealth parked with mutual funds to Rs. 30 lakh crore. This is neckandneck with the money held by individual investors in stocks, which Prime InfoBase pegs at about Rs. 30.4 lakh crore in September 30, 2023.
This is a significant milestone because mutual funds made their debut only in in the mideighties (not counting the erstwhile UTI) in India, while stock exchanges have been around since 1875.
In the 10 years from September 2013 to September 2023, the value of individuals' stock market holdings zoomed from Rs. 4.75lakh crore to Rs. 30.4lakh crore. But the value of their MF holdings has expanded faster from Rs. 3.8lakh crore to Rs. 30lakh crore.
This double engine growth in the two assets in the last 10 years is likely to have unleashed a substantial wealth effect for Indian households.
This could provide one explanation for affluent households in India splurging on premium goods and services and going on a borrowing binge, despite snailpaced income growth. Official RBI data on household savings in stocks and mutual funds at less than 1 per cent of GDP tends to underplay the wealth effect, because it captures only inflows into these assets at cost.
Lure of Market Returns
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
ICICI Bank partners with PhonePe to offer instant credit on UPI
ICICI Bank announced that it has partnered with PhonePe to offer instant credit on UPI to its pre-approved customers on the app of the digital payments company.
Indiagold Eyes Major Expansion in India's Gold Loan Market
Indiagold, a prominent fintech company specialising in gold loans, is set to disrupt the gold loan industry with its ambitious expansion plans and innovative product offerings.
RBI CIRCULAR
Facilitating accessibility to digital payment systems for Persons with Disabilities Guidelines
Legal News
The Supreme Court announced the launch of a new webpage on its official website providing summaries of landmark judgments.
The Role and Impact of the Insolvency and Bankruptcy Code (IBC) in NPA Recovery
Indian banks, especially grappling with the mounting challenge of Non-Performing Assets (NPAs) within Scheduled Commercial Banks (SCBs), are experiencing a significant downturn in their capacity for credit recycling, resulting in reduced business opportunities and declining profits. However, various factors contributing to the severity of NPA problem are including macro-economic, political, and internal factors, emphasizing the complexity of the issue. With this background, the present study puts an effort to look at the role of the Insolvency and Bankruptcy Code (IBC) in NPA recovery and also showcasing its significance in resolving insolvency and maximizing creditor recovery.
Big Data in Banking: Analysing its Role, Advantages and Challenges
Globally Inflation started rising post April 2021 and went above the target range set by most of the Central Banks. It had remained low and dormant for a substantial duration since the global financial crisis. CPI inflation in developed countries such as US, UK and Euro zone, began to exceed their traditional target of 2% and continue to stay at these elevated levels till recent time.
Is SIP Always the Best Option? A Look into Lump-Sum vs SIP During Volatile Markets
SIP is a method of investing a fixed amount at regular intervals, typically monthly, into a mutual fund. It allows investors to buy more units when prices are low and fewer when prices are high, a process known as rupee cost averaging.
Strategies for Mutual Fund Retail Investors during market downturns
When stock markets experience a decline, mutual fund investors often face a sense of insecurity and apprehension. The volatility can lead to impulsive decisions, which, rather than securing financial health, may impair long-term investment objectives.
The Rise of Green Marketing: Driving Sustainable Change
Green marketing refers to the practice of promoting products or services that are environmentally friendly or sustainable. It involves incorporating eco-friendly elements into various aspects of marketing strategies, including product development, packaging, advertising, and distribution.
Fraud Risk Management In Banking
Fraud risk management is a fundamental aspect of overall Risk Management within the banking sector. In India, banks adhere strictly to guidelines set forth by the Reserve Bank of India (RBI) to prevent, detect, and promptly report fraudulent activities.
