30 September 2024
E
CO
S
COPE
The Economy Observer
Growing significance of stock market in household financial assets
Indian households not conservative
It is widely believed that the household sector in India is highly conservative regarding its exposure in the capital market.
This belief, however, does not hold water. The
RBI
recently released its first-ever quarterly estimates of the household
financial balance sheet from 1QFY12 to 4QFY23. We
replicated
the RBI’s methodology and achieved 96-97% accuracy in
our result. We, therefore, extended these estimates to 1QFY25 based on some assumptions. One of the key
developments has been the rising prominence of the equity market in household gross financial assets (HHGFA) during
the past few years, particularly since the onset of the pandemic. We discuss these trends and more in this report.
Our estimates indicate that the household sector, which includes individuals and non-profit institutions serving
households (NPISHs), directly owned 21.5% of India’s listed equity market in 1QFY25
(Exhibit 1).
This ownership has
remained within a very narrow range of 21-22% since the beginning of CY21, following a more stable period between
18% and 20% prior to that, and between 16% and 17% during CY11 to mid-CY16.
Notwithstanding the stable share of the household sector in listed equities, which has experienced occasional step-ups,
the impressive surge in equity market capitalization over the past year has propelled the market value of HHGFA. India’s
equity market capitalization jumped more than 50% YoY to INR441t as of 1QFY25 (i.e., quarter-ending Jun’24), while the
holdings of the household sector surged to INR95t in 1QFY25
(Exhibits 2 and 3)
from INR60t (or 20.6%) in 1QFY24.
Is this participation level of the retail sector in the listed equity market low? Barring the US, the household sector owns
between 11% and 18% of the listed equity market in other major economies, which is lower than 21-22% share in India
(Exhibit
4).
The share, notably, is much higher at ~40% in the US though. Further, the share of the household sector in the listed
equity market has increased in the post-pandemic period in India, Germany (DE), and the US, while it has declined only in
Canada (CA), with a largely stable share in other economies.
Direct exposure to listed equities, however, constitutes only a portion of the total exposure of the household sector.
Mutual funds (MFs, or investment funds) also play a very important role, and thus, we combined both direct and indirect
exposure (through MFs) to determine the total exposure of the household sector to the securities market.
The total size (or the asset under management, AUM) of India’s mutual fund industry reached INR61.2t as of Jun’24, up 38%
from a year ago. The household sector (including high net worth individuals and retail) owned about 63% of the MFs AUM,
up from 55% in Dec’19 and 50% in 2014-15
(Exhibits 5 and 6).
Within this, equity instruments accounted for about 70%,
while non-equity constituted the remaining 30% (almost the same as in Dec’19 but much lower than ~50% a decade ago).
If we combine the direct and indirect exposure of the household sector, referred to as equity & investment funds (E&IFs),
it amounted to INR134t (USD1.6t) or 44% of GDP in 1QFY25
(Exhibit 7).
This figure is again comparable to the 30-55%
range observed in most advanced economies covered in our study. However, it is less than half of >100% of GDP in CA
and ~161% of GDP in the US
(Exhibit 8).
Further, the share of E&IFs increased to 28% of GFAs of households in India in 1QFY25, compared to 17% at the end of
CY19
(Exhibit 9).
Although this figure is lower than 43% in the US and 33% in CA, it is notably higher than the share of
E&IFs in household GFAs* in other advanced economies such as the UK, DE, France, Japan and Australia
(Exhibit 10).
Overall, there is no doubt that the role of the equity market in household financial balance sheet and financial net worth
has increased significantly in the post-pandemic period, particularly over the past 4-5 quarters. This trend may contribute
to the growing wealth effect within the household sector. However, the declining level of household savings (flow,
annual data) and the usual concentration of financial wealth among a specific group (i.e., the top of the pyramid) suggest
that further research and more granular data are necessary. Further, one must think twice before calling the Indian
household sector conservative in terms of its exposure to the equity markets.
*Our analysis is restricted to the listed equity market, and thus, the unlisted equity exposure is excluded from all nations to make it
comparable. Unlisted equity can form a substantial portion of HHGFAs; however, there is data available for the Indian economy.
Nikhil Gupta
– Research analyst
(Nikhil.Gupta@MotilalOswal.com)
Tanisha Ladha
– Research analyst
(Tanisha.Ladha@MotilalOswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Exhibit 1: Household sector owns 21-22% of India’s listed
equity market
Direct holdings of HH sector# in listed equity (%)
24
21.5
21 19.8
18
15.7
15
12
FY07
FY10
FY13
FY16
FY19
FY22
1QFY25
#Including NPISHs
Exhibit 2: India’s equity market has surged in the past one
year…
Listed equity market capitalization (% of GDP)
180
146.1
140
18.9
100 75.0
60.0
60
20
FY07
FY10
FY13
FY16
FY19
FY22
1QFY25
Source: NSE EPR, Capitaline, MOFSL
77.5
Exhibit 3: …due to which household sector’s equity holdings
have also increased rapidly
Direct holdings of HH sector# in India's listed equity
94.9
(INR tn)
Exhibit 4: A comparison of the share of household sector in
listed equity markets in a few major economies
Direct holdings of HH sector in listed equity (%)
39.6
Pre-Covid
Post-Covid
CY24*
18.2
28.1
38 40
FY18
FY19
FY20
FY21
FY22
FY23
FY24 1QFY25
#Including NPISHs
US
11.3
12 11
UK
14 18
DE
18.5
8.9
18 18
JP
11 10
FR
21.5
16.4
17 16
CA
19 21
IN
*2QCY24 data for the US, JP, CA and IN (1Q for others)
Source: NSE EPR, Capitaline, CEIC, MOFSL
Exhibit 5: India’s MF AUM has also increased rapidly to
INR61t as of Jun’24…
Size of MFs AUM in India
41.2
21.7
19.5
4.9
39.4
INR t
% YoY
Exhibit 6: …of which roughly ~63% has been held by the
household sector
Share of household sector* in MFs (%)
Equity
Non-equity
35.5
37.8
22
22
29
19
31
FY17
18
18
19
16
12
16
14
19
11.4
21.4
23.8
22.3
-6.4
FY18
FY19
FY20
FY21
FY22
31.4
37.6
27
53.4
61.2
24
26
22
30
FY15
37
40
35
39
45
44
50
45
FY23
FY24 1QFY25
FY13
FY19
FY21
FY23
1QFY25
Mutual funds (MFs), also called investment funds
*High net worth individuals and retail sector
Source: AMFI, MOFSL
30 September 2024
2
 Motilal Oswal Financial Services
Exhibit 7: Total# exposure of the household sector to the
financial markets touched INR134t in 1QFY25…
160
120
80
42
40
0
CY12
CY14
CY16
CY18
CY20
CY22
CY24*
#Direct + Indirect ((MFs/investment funds)
*2QCY24
Total# value of equity & invt funds (INR t)
134
Exhibit 8: …equaling 44% of GDP, much lower than the US
and CA but comparable to other nations
Equity & invt funds# (% of GDP)
161
CY19
CY24*
94
41
21
143
25
32
52
24
35
87
56
44
21
25
FR
54
US
UK
DE
JP
CA
AU
IN
*2Q data for the US, JP, CA, AU and IN (1Q for others)
#Excluding unlisted and other equity to make it comparable
Source: Various national sources, MOFSL
Exhibit 9: The share of E&IFs has increased to 28% of HHGFA
as of 1QFY25…
30
25
20
15
10
13
Share of equity & invt funds# in HHGFAs (%)
28
Exhibit 10: …rising more rapidly in the post-pandemic period
than other major economies
Share of equity & invt funds# in HHGFAs* (%)
48
36
CA
US
17
24
12
JP
AU
DE
FR
IN
CY12
CY14
CY16
CY18
CY20
CY22
CY24*
UK
0
2QCY18 2QCY19 2QCY20 2QCY21 2QCY22 2QCY23 2QCY24
#Direct + Indirect (MFs/investment funds)
*Excluding unlisted and other equity to make it comparable
Source: Various national sources, MOFSL
#Direct + Indirect (MFs/investment funds)
*As of 2QCY24 (1QFY25 or Jun’24)
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30 September 2024
3
 Motilal Oswal Financial Services
NOTES
30 September 2024
4
 Motilal Oswal Financial Services
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