Rising retail ownership to spur equity cult in India: Morgan Stanley

Retail investors have become a force to reckon with as their ownership of Indian equities has risen by 800 basis points or 8 per cent to 23.4 per cent in the last 10 years, suggests a recent note from Morgan Stanley.

- PUNEET WADHWA

The US-based banking giant said this number is set to rise in the next few years as Indian households are still underinvested in equities. India's demographics, policy framework, investor education and modest positive real rates will fuel an "equity cult" in India, it said.

"At cost, only 3 per cent of the household balance sheet is in equities (excluding founders' equity holdings). This number could rise to double digits. If one looks at the wealth creation of the past decade (we estimate households have added $8.5 trillion in wealth), about 11 per cent has come from equities. This disproportionate share of equities in wealth accretion further underscores our opinion," wrote analysts at the investment bank led by Jonathan F Garner, chief Asia and emerging market strategist.

Though Morgan Stanley expects market and corporate activity to rise in the coming years, equity market returns are likely to moderate in the next 10 years and are likely to compound in low double digits.