Indian Household's Equity Ownership Skyrockets from 1.1% in 2005 to 21.5% in June 2024.

Indian households are taking a more active role in the equity markets than previously believed, with ownership of listed equities reaching 21.5% as of June 2024. This level is significantly higher compared to other major economies, except the US, where household ownership ranges between 11% and 18%, according to a report by Motilal Oswal Financial Services.

For context, the US households hold about 40% of their equity markets. India’s figure is particularly striking as it has consistently stayed between 21-22% since early 2021, compared to the 16-20% range observed from 2011 to 2020.

Growing Exposure to Equity & Mutual Funds:

India’s total equity market capitalization soared by over 50% year-on-year to Rs 441 lakh crore by June 2024. During this time, household investments in listed equities also surged to Rs 95 lakh crore, up from Rs 60 lakh crore the previous year.

When combining direct equity holdings and mutual fund (MF) investments, also known as Equity & Investment Funds (E&IF), the household sector’s exposure amounted to Rs 134 lakh crore, which is 44% of India’s GDP. This level of exposure is comparable to other developed economies, though still behind countries like Canada and the US, where equity investments can reach 100% and 161% of GDP, respectively.

Mutual Fund Growth:

India’s mutual fund industry has also seen a significant boost, with total assets under management (AUM) hitting Rs 61.2 lakh crore as of June 2024, a 38% jump from a year ago. Households (including high net worth individuals and retail investors) own about 63% of this total, a notable increase from 55% in 2019. Interestingly, around 70% of household mutual fund investments are in equity instruments.

Equity Market's Increasing Role in Financial Assets:

The report highlights how equities have become a key part of household financial assets in India, especially since the pandemic. While household savings have decreased over the past few years, their equity investments have surged, contributing to a growing "wealth effect"—where rising asset values can make people feel wealthier. However, this wealth is often concentrated among a small portion of the population, suggesting a need for more detailed analysis.

Conclusion:

India’s household sector is becoming increasingly engaged in equity markets, dispelling the notion that Indian households are conservative investors. With growing participation in both direct equities and mutual funds, Indian households are playing a more substantial role in the country’s financial markets, a trend that could continue to reshape the economy in the coming years.