Global private financial wealth grew by 8.2% in 2016 to reach $63.5 trillion - MYREALITY.In, Real Estate, Share Market, Mutual Fund, Insurance
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Tuesday, December 12, 2017

Global private financial wealth grew by 8.2% in 2016 to reach $63.5 trillion


Equities lead the charge for wealth creation: Karvy’s India Wealth Report 2017

- Individual wealth in direct equity rose around 26.8% to Rs 37.6 lakh crore in FY17

- Fixed Deposits retained top spot to be India’s most preferred financial asset
- Financial Assets ruled the roost in wealth creation in FY17

- Wealth in real estate is likely to double in next 5 years, signifying a turnaround for the sector in coming years   

KARVY Private Wealth, the wealth management arm of the leading financial-services conglomerate KARVY Group, launched its 8th edition of India Wealth Report 2017 today. The Report provides a holistic view of the Wealth held by individuals in India and the future investment patterns. Based on extensive research, the report is a big draw among individual investors in India for predicting the future “Wealth” trends.

Global private financial wealth grew by 8.2% in 2016 to reach $63.5 trillion, against a growth rate of 4% in 2015. After close to a decade of economic slump, global economy is on a recovery mode. While US recorded a GDP growth rate of 3% in July-September period, China is estimated to grow at 6.8% in 2017. Amid such optimism, Indian economy is also showing signs of a turnaround after a temporary blip owing to various structural reforms.
Measures such as demonetisation, implementation of GST, RERA and the new Insolvency and Bankruptcy Code have changed the ways of doing business in India. This has led to more informal sectors coming under the fold of formal economy along with increasing preference for financial assets over physical assets. Going ahead, we expect this trend to continue over next 5 years with direct equity, mutual funds, fixed deposits, insurance and pension funds contributing a larger portion of overall asset pie. On the other hand, despite contraction of physical assets base, real estate is likely to become the most preferred physical investment option for Indians in coming years.  

In FY17, total wealth held by individuals in India grew by 11% to Rs 344 lakh crore on the back of stellar performance of direct equity asset class. According to the report, the wealth held in financial assets by Indian individuals has seen a substantial rise in FY17 growing at a rate of 14.63% to Rs 204 lakh crore. This is a significant trend reversal from previous year when physical assets had an upper hand over financial assets in terms of growth rates. Interestingly, once risk averse individual investors are also embracing direct equity as a lucrative investment option in their bids to beat inflation and garner high return.

Highlights:
1-   Total wealth held by individuals in India has grown by 11% to Rs 344 lakh crore in FY17. Karvy predicts overall wealth in India to nearly double to Rs 639 lakh crore at a CAGR of 13% over the next 5 years
2-   Individual wealth in financial assets grew by 14.63% to reach Rs 204 lakh crore. This handsome growth was driven by Direct Equity (26.8% growth), Mutual Funds (39.2%), Savings Deposits (27.85% growth) and Current Account Deposits (39.72% growth)
3-   Over 66% of wealth in financial assets is held in direct equity, fixed deposits, insurance and savings deposits
4-   Individual Wealth in physical assets stood at Rs 140 lakh crore, slowing down to just 5.92% growth as compared to 10.32% growth in the previous year
5-   Gold and real estate form 91% of physical assets, where individual wealth is growing at a slower pace
6-   IPOs, pre-IPOs and unlisted equities/private equity are the flavor of the current time among HNIs who seek higher returns on account of unlocking of potential valuation upon listing
7-   Individual wealth in Direct Equity is expected to grow at a CAGR of over 21% in next 5 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
8-   The implementation of various reforms such as GST, RERA, Insolvency and Bankruptcy Code and recapitalization of banks among others are likely to move more informal sector into the formal economy and hence boost GDP and individual wealth


Table 1: Total Individual Wealth in India in FY17

Category
FY 17
Amount
(₹ Crore)
FY 16
Amount
 (₹ Crore)
YoY
Change
Proportion
FY 17
Proportion
 FY16
Financial Assets
2,03,90,576
1,77,88,216
14.63%
59.27%
57.35%
Physical Assets
1,40,09,717
1,32,26,838
5.92%
40.73%
42.65%
Total
3,44,00,293
3,10,15,054
10.91%
100.00%
100.00%


Over 66% of individual wealth in financial assets was held in direct equity, fixed deposits, insurance and saving bank deposits in FY17. Meanwhile, wealth in direct equity grew by 26.80% in FY17 against a 13.84% fall in FY16. Direct equity now holds 18% of total wealth pie of individual financial wealth in India.

In FY17, assets under management (AUM) of mutual funds surged by 39.21% against a growth rate of 12.95% in FY16. This was majorly attributed to positive performance of equity market and increased contribution from the individual investors. Saving and current deposits also posted growth rates of 27.85% and 39.72% respectively 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. All these asset classes had shown double digit growth on y-o-y basis in FY16.
Classification of Individual Wealth in India based on Financial Assets


Financial Assets
FY 17
 Amount
(₹ Crore)
FY 16 Amount
(₹ Crore)
YoY
Change
Proportion
 FY 17
Proportion FY16
Fixed Deposits & Bonds
40,14,624
36,81,658
9.04%
19.69%
20.70%
Direct Equity
37,58,255
29,63,882
26.80%
18.43%
16.66%
Insurance
30,01,230
25,47,563
17.81%
14.72%
14.32%
Saving Deposits
27,60,811
21,59,478
27.85%
13.54%
12.14%
Cash
13,35,200
16,63,432
-19.73%
6.55%
9.35%
Provident Fund
13,04,316
11,51,027
13.32%
6.40%
6.47%
Mutual Funds
8,68,396
6,23,825
39.21%
4.26%
3.51%
NRI Deposits
7,57,200
8,26,727
-8.41%
3.71%
4.65%
Unlisted Equity
7,23,127
5,86,118
23.38%
3.55%
3.29%
Small Savings
6,67,613
6,58,596
1.37%
3.27%
3.70%
Pension Funds
4,75,227
3,92,682
21.02%
2.33%
2.21%
Current Deposits
6,10,931
4,37,262
39.72%
3.00%
2.46%
Alternative Investments
92,963
77,503
19.95%
0.46%
0.44%
International assets
20,684
18,462
12.04%
0.10%
0.10%
Total
2,03,90,576
1,77,88,216
14.63%
100.00%
100.00%
Individual Wealth in physical assets stood at Rs 140 lakh crore, having grown by 5.92% as against 10.32% recorded in FY16. Individual wealth in gold stood at Rs 68.45 lakh crore, which is close to half of the total physical assets base. Similarly, wealth in real estate came in second at Rs 60.25 lakh crore. Gold and real estate together form nearly 91% of the physical wealth in India.



Table on Classification of Individual Wealth in India in Physical Assets:

Physical Assets
FY 17 Amt
(₹ Crore)
FY 16 Amt
(₹ Crore)
YoY Change
Proportion
FY 17
Proportion FY16
Gold
68,45,167
65,90,575
3.86%
48.86%
49.83%
Real Estate
60,25,206
55,47,254
8.62%
43.01%
41.94%
Diamond
7,98,240
8,02,840
-0.57%
5.70%
6.07%
Silver
2,28,916
2,01,169
13.79%
1.63%
1.52%
Platinum
6,998
6,452
8.46%
0.05%
0.05%
Other Gems and jewellery
1,05,190
78,548
33.92%
0.75%
0.59%
Total
1,40,09,717
1,32,26,838
5.92%
100.00%
100.00%


In the next five years i.e by FY22, the pace of investing in financial assets will continue its growth momentum. Overall individual wealth in India is likely to nearly double to Rs 638.89 lakh crore, growing at a CAGR of 13.18% during this period. Financial assets will constitute around 63% of the total individual assets pie by FY22, pushing the contribution of physical assets further down to 37%. Within the financial asset class, direct equity will emerge as the biggest contributor of individual wealth.

In the physical assets space, Indians love for real estate will continue. Wealth held in real estate is likely to double to Rs 121 lakh crore over the next five years. This indicates a revival of growth in real estate sector in coming years on the back of increased transparency in regulations along with renewed focus on affordable housing segment. For HNIs, alternative asset classes will be a big draw in coming years with unlisted stocks emerging as the new growth spot.

On this occasion, Mr. Abhijit Bhave, Chief Executive Officer of KARVY Private Wealth said, “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. Going ahead, financial assets are likely to sustain their dominant position. We also see real estate sector seeing a turnaround in near future.”

About Karvy Private Wealth-

Karvy Private Wealth is the Wealth management arm of Karvy Group providing exclusive and customised wealth management solutions to High net-worth individuals (HNIs) and families based on their specific needs. With the widest range of product offerings backed by industry’s finest brains, Karvy Private Wealth is a complete wealth management boutique. This of course is built upon the strong belief of the Group of providing clear, unbiased and most appropriate investment solutions to our esteemed clients and prospects. Karvy Private Wealth is an open architecture firm at 2 levels – asset class level and product level, offering a comprehensive range of investment solutions across all asset classes including debt, equity, real estate and alternate assets.

At Karvy Private Wealth, we constantly work to grow your wealth over a long period of time to fulfill your financial aspirations and goals. For details, please visit www.karvywealth.com.

About Karvy Group-

The Karvy Group, established in 1982 and headquartered at Hyderabad, India is the Country’s leading financial services conglomerate. The Group has grown steadily over the years, establishing a global presence with a wide range of financial-services offerings. The Groups enjoys leadership positions and competitive advantage in most business segments. A highly diversified enterprise has over 28,000 employees, spanning a vast network of over 1000 offices in about 600 cities / towns across India, UAE, Bahrain and the United States of America. Given such a well-established network, that touches the lives of millions, Karvy enjoys significant brand loyalty among investors, both individual and institutional. The Group covers the Entire spectrum of financial services, such as registry and share transfer, stock broking, distribution of financial products (including equities, mutual funds, bonds, IPOs, and fixed deposits), wealth management, corporate finance, commodities broking, NBFC, data management services, insurance broking, investment banking, and depository participant, among others.


In order to ride new opportunities presented by the changing business scenario, Karvy has diversified into two new businesses viz. Data Analytics and market research.To know more about our businesses/services offerings please visit www.karvy.com
Global private financial wealth grew by 8.2% in 2016 to reach $63.5 trillion Reviewed by S. Chitra on December 12, 2017 Rating: 5 Equities lead the charge for wealth creation: Karvy’s India Wealth Report 2017 - Individual wealth in direct equity rose around 26.8%...

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