Growing Trajectory of India from last couple of years
This is the first time ever that equity has sustained above 4% of Indian household assets for two consecutive years.
4.8% is the highest ever equity allocation %
With PF and Insurance at 5.7% and 6.2% , with PF investing 15% of their funds in Equity, Assuming 15% of insurance funds being invested in equity, total allocation including the indirect allocation would be 4.8% + (0.75% + 0.9% = 1.65%) => 6.45%
Let’s check how the rest of the world is faring :
Data from USA and Rest of the world (Exl. CHina)
With direct equity exposure and Mutual funds, it is almost at 46% in USA. Which is extremely high. Basically half of the US household assets are exposed to US markets. No wonder, US markets are closely tracked by US govt and rest of the world. Because, if US markets take a hit, it affects household wealth in US and that in turn, affects rest of the world.
I personally think that, US economy is having too much exposure to equity which is without a doubt one of the riskiest if not the most riskiest form of asset class. Is it comparable with our economy? ofcourse not and it is highly improbable that we may reach these levels when it comes to equity exposure in our country.
Rest Of the World (excl. China)
- Equity as a % of financial assets
- Mutual funds as a % of financial assets
Source : OECD
Source : HSBC
One country which is probably comparable due to our population size and patterns of levels of income to some extent (to the similar trajectory that we have had till 90’s) is china.
In china, Equity amounts to 12% of all household wealth and I assume, if we take into consideration indirect form of allocation to equity it may be upto 20% at maximum.
This is mostly likely to be the level of equity allocation that our country may aspire to achieve in the coming years.
If we compare our household asset composition with china,
We seem to have more allocation in Real estate and Gold, whereas Chinese have invested more in stocks, bonds and deposits.
Let’s see whether we follow the similar pattern as china or have a different approach towards equity like west. I somehow tend to go with the former option.