Indian households equity investment is likely to double to $20 billion annually in the next three years, which may boost liquidity and ease interest rates, Deutsche Bank said in a report on Thursday.
India’s share markets are witnessing a bull run on global cues and as domestic investors are pouring in more money into equities and mutual funds.
“The architecture of the financial savings of Indian households (HH) is undergoing a structural shift,” Abhishek Saraf, an analyst with Deutsche Bank said in a note.
The share of financial assets in HH savings has risen from 32% in 2011-12 to 40% in 2014-15 due to an unprecedented wave of inflows into domestic equity mutual funds over the past three years.
“We believe this trend is set to intensify further and, in an optimistic scenario, average annual HH flows into equities over 2018-20 could be twice the past three years’ average of total flows into equity mutual funds,” the report said.
In a moderately conservative scenario, the annual buying of equities could average $13 billion in the next three years. In a highly conservative scenario, the annual buying of equities could average $8.3 billion.
{{/usCountry}}In a moderately conservative scenario, the annual buying of equities could average $13 billion in the next three years. In a highly conservative scenario, the annual buying of equities could average $8.3 billion.
{{/usCountry}}In all three scenarios, domestic MFs should witness sustained robust inflows. Consequently, MFs as an investor group should emerge as a key institutional driver of Indian equity markets.
The rising share of financial savings should boost domestic liquidity and ease the rates environment, raise financial capital productivity, lower hurdle rates for capital-intensive projects, unshackle the entrepreneurial drive of SMEs, self-employed businesses and stimulate debt-driven discretionary consumption demand, it said.