Fixed deposits score big over equities, MFs for investment: Sebi Survey

New Delhi: More than 95 percent Indian households prefer to park their money in bank deposits, while less than 10 percent opt for investing in mutual funds or stocks, a new Sebi survey showed Wednesday.

The survey, conducted across urban and rural areas of the country, showed that life insurance was second most preferred investment vehicle, followed by precious metals, post office savings and real estate in the top-five.

Mutual funds came at sixth place (9.7 percent), followed by stocks (8.1 percent), pension schemes, company deposits, debentures, derivatives and commodity futures (1 percent) as investment vehicles for the urban households.

Among the rural households, not even one percent of the survey respondents were investors, while even the awareness about mutual funds and equities was dismal at just 1.4 percent.

However, 95 percent of rural survey respondents had bank accounts, 47 percent life insurance, 29 percent post office deposits and 11 percent saved in precious metals.

On a positive note, the survey found the investor base in India is increasing as nearly 75 percent of the investors in the Sebi Investor Survey 2015 participated in the securities markets for the first time within the last five years.

The survey was commissioned in the year 2015 and got completed last year, while its results were released today by the capital markets regulator. Nielsen, a global leader in primary research, has conducted and analysed this Sebi survey.

The last survey was conducted in 2008-09.

Sebi said the survey first listed a set of 2,04,694 households and basic information about demographics, income, savings and investments were collected.

In the second step, a subset of 50,453 amongst these listed households were chosen to conduct the final survey.

The data was used to create an estimate of the total number of investing households at the end of 2015.

Using a bootstrapping methodology project, it was estimated that there were a total of 3.37 crore investor households in India. Of these, 70 percent (2.37 crore) reside in urban areas while the other 1 crore were rural households.

Among these, mutual funds were the most popular investment instruments with nearly 66 percent (or 2.2 crore households) investors. There were an estimated 1.9 crore households which invested in equities and 77 lakh household which invested in bonds (public, private and PSU).

Among derivative instruments, there were 30 lakh equity and currency derivatives investors and 21 lakh investors in commodity futures.

Amongst the equity investors, about 18 percent(33 lakh) had invested in the primary (IPO) markets.

In his foreword, Sebi's former Chairman U K Sinha, during whose tenure the survey was conducted, said the global financial crisis and its effect were felt in India since the last survey (held in 2008-09) and it was imperative for policy makers to understand the change in investor behavior as an effect of it.

"The detailed main survey has been informed by state-of- the-art research in behavioral finance (the overlap of finance and psychology) to provide insights into not just the actions of investors but also their perceptions which lead to action.

"While some insights received from the surveys have been expected, others have been surprising. However, that is the purpose of these studies - to gain the insights and to act upon them."