Total individual wealth to double to Rs 639 lakh crore in 5 years: Report

Mumbai: The total wealth held by individuals in the country is expected to double in the next five years to Rs 639 lakh crore, growing at an annual rate of 13 percent over the next five years, a recent report said.

The total wealth held by Indians has grew by 11 percent to Rs 344 lakh crore in 2016-17, according to a study by brokerage Karvy India Wealth Report.

Individual wealth in financial assets grew by 14.63 percent to reach Rs 204 lakh crore. "This growth was driven by direct equity (26.8 percent growth), mutual funds (39.2 percent), savings deposits (27.85 percent growth) and current account deposits (39.72 percent growth)," the report pointed out.

"Equity has emerged as the favoured asset class in FY17 with individual investors cashing in on the current bull run of the equity markets. Apart from outperformance of equities, a host of structural reforms implemented by the Government are encouraging Indian individuals to hold wealth in financial assets," Abhijit Bhave, chief executive officer of Karvy Private Wealth said in the report.

The growth in mutual funds was majorly attributed to positive performance of equity market and increased contribution from the individual investors. Saving and current deposits also posted growth as cash inflow into the bank accounts surged post demonetisation.

Meanwhile, major drags to total individual wealth included cash, NRI deposits and small savings in FY17, the report noted. All these asset classes had shown double digit growth on y-o-y basis in FY16, it pointed out.

Further, it stated that over 66 percent of wealth in financial assets is held in direct equity, fixed deposits, insurance and savings deposits.

"Going ahead, financial assets are likely to sustain their dominant position. We also see real estate sector seeing a turnaround in near future," Bhave pointed out.

The report also said that gold and real estate form 91 percent of physical assets, where individual wealth is growing at a slower pace.

Individual wealth in physical assets stood at Rs 140 lakh crore, slowing down to just 5.92 percent growth as compared to 10.32 percent growth in the previous year.

Initial public offerings (IPOs), pre-IPOs and unlisted equities and private equity are favoured by high networth individuals (HNIs) who seek higher returns on account of unlocking of potential valuation upon listing.

Individual wealth in direct equity is expected to grow at an annual rate of over 21 percent in the next five years to reach almost Rs 100 lakh crore. "This will have a rub-off impact on other financial assets like mutual funds, insurance and pension funds leading to high growth," the report said.

The implementation of various reforms such as GST, RERA, Insolvency and Bankruptcy Code and recapitalisation of banks among others are likely to move more informal sector into the formal economy and hence boost GDP and individual wealth, the report explained.