The retail conundrum - II
We find that household investors had began meaningful
investment in listed equity in late 70’s at the time of FERA dilution of MNCs.
Reliance in 80’s and PSU disinvestment and capital market reforms in early 90’s
drew the 2nd lot of household investors. IT boom of late 90’s drew
the 3rd set to listed equity. In these 3decades households invested
8-17% of their financial savings in capital market related products.
Though the household financial savings started declining from
mid 1990’s, 2000 was the key inflection point. Since then household have
invested more in physical asserts than financial instruments.
Our informal survey of some broker and household investors
highlights multiple reasons for this trend. Some key reasons suggested were:
(a)
Fall in average age of house ownership. Higher
income levels in urban areas, rise in nuclear families and rise in real estate
prices has prompted people to buy houses earlier in their life cycle.
(b)
Rise in personal automobile ownership.
(c)
Rise in self owned enterprises has also
apparently led to diversion of savings to physical assets.
(d)
Rise in gold prices in 2000’s has definitely
contributed to the trend.
With rise in urbanization and affordability, the trend is likely
to exacerbate only.
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