Traditionally, Indians have favoured physical assets like gold and real estate as a means of securing their financial future. Bank fixed deposits, known for their stability, were also a preferred choice among financial instruments. However, the past few years have witnessed a significant paradigm shift in the investment behaviour of individual investors. A remarkable trend has emerged wherein there is a decline in investments in physical assets and a simultaneous surge in investments in financial assets, particularly equity and mutual funds.
This shift reflects the growing ‘financial trend’ of household savings in India, with a notable preference for financial instruments offering potentially higher returns and diversification benefits. Among these financial instruments, equity and mutual funds have emerged as the frontrunners, capturing the attention and trust of retail investors seeking avenues for wealth creation. This trend is evident in the industry’s assets under management (AUM), which have risen to constitute 79 per cent of bank fixed deposits, a significant leap from 59 per cent recorded five years ago.
It signals a departure from traditional banking products towards equity and mutual funds. Mutual funds, in particular, have emerged as the preferred investment vehicle among retail investors, evident from the exponential growth in the number of folios and accounts over the past few years. Since December 2014, the number of investor accounts has witnessed a steady upward trajectory, soaring from ₹4.03 crore to ₹16.49 crore by December 2023. The acceleration in growth, especially since 2020, highlights the increasing adoption of mutual funds as a wealth-building tool.
This story is from the February 26, 2024 edition of Dalal Street Investment Journal.
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This story is from the February 26, 2024 edition of Dalal Street Investment Journal.
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