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Household funds in equities dip

business Updated: Aug 27, 2009 23:59 IST
HT Correspondent

Domestic demand may have kept the Indian economy afloat in the second half of 2008-09 when the full impact of the global meltdown was felt on the country, but equities bore the brunt of the turmoil as both domestic and foreign money stayed away from the markets, says the Reserve Bank of India.

Both foreign institutional investors (FIIs) and domestic retail investors chose to stay away from equities preferring to invest in safer avenues such as deposits and insurance funds, the RBI said in its annual report released on Thursday.

The central bank has also pointed out that financial savings of a household in equities dropped from 12.4 per cent of total financial household savings in 2007-08 to 2.6 per cent in 2008-09 with mutual funds as well as savings invested in Unit Trust of India (UTI) showing a negative trend as people preferred to withdraw their money from these instruments.

Public sector bonds emerged as the surprise package in the equities market as 0.10 per cent of financial savings in equities went into this instrument compared with nil last year.

The report observed that primary markets had been mauled since January 2008.

“Resource mobilisation through public issues, private placements, Euro issues and mutual funds witnessed a sharp decline due mainly to postponement of resource raising plans by corporates,” the RBI report said.