Indian households's savings preference shifts towards MFs and insurance: RBI report

Low deposit rates, fall in gold prices and stock market boom influence the choice

by Arjit Singh Bhambra

Post demonetisation, Indian households have shown a clear preference to invest their money in mutual funds (MFs) and insurance schemes, according to a paper titled ’Financialisation of savings into non-banking financial intermediaries’ by the RBI. With the AUM of mutual funds touching an all-time high of Rs.20 trillion by end of July 2017 [see here] and the life insurance companies witnessing an overall growth of 46 per cent in the premiums collected, a structural shift is apparent in the behaviour of savings made by Indian households. Furthermore, reduced interest rates on bank deposits, unfavourable real estate market conditions and the recent decline in gold prices, combined with the recent upsurge in capital markets have made MFs more attractive to the investors. As these sectors witness growth in AUMs, channelising these funds into productive segments of the economy remains a challenge, as per a report in Hindu Business Line.

References
1. http://www.thehindubusinessline.com/markets/demonetisation-mutual-funds-gold-real-estate/article9814407.ece
CMIE STATISTICS
Unemployment Rate
Per cent
4.8 +0.0
Consumer Sentiments Index
Base September-December 2015
97.2 -0.2
Consumer Expectations Index
Base September-December 2015
96.5 0.0
Current Economic Conditions Index
Base September-December 2015
98.2 -0.5
Quarterly CapeEx Aggregates
(Rs.trillion) Mar 17 Jun 17 Sep 17 Dec 17
New projects 4.01 2.11 1.18 0.84
Completed projects 1.95 0.86 1.03 0.90
Stalled projects 0.74 2.67 0.67 0.92
Revived projects 0.86 0.30 0.29 0.20
Implementation stalled projects 0.33 0.69 0.73 0.58
Updated on: 23 Jan 2018 8:20PM
Quarterly Financials of Listed Companies
(% change) Mar 17 Jun 17 Sep 17 Dec 17
All listed Companies
 Income 10.2 9.7 7.9 10.7
 Expenses 11.9 10.0 9.2 10.4
 Net profit 16.1 -19.8 -20.0 16.1
 PAT margin (%) 6.0 5.3 5.4 14.2
 Count of Cos. 4,460 4,389 4,313 197
Non-financial Companies
 Income 11.8 10.3 7.7 10.7
 Expenses 15.6 10.6 7.8 10.6
 Net profit -2.3 -25.2 -7.9 15.1
 PAT margin (%) 6.2 5.2 6.1 14.3
 Net fixed assets 6.9 9.0
 Current assets 2.7 78.0
 Current liabilities 8.8 10.6
 Borrowings 4.9 10.1
 Reserves & surplus 6.3 4.8
 Count of Cos. 3,448 3,407 3,348 146
Numbers are net of P&E
Updated on: 23 Jan 2018 8:21PM
Annual Financials of All Companies
(% change) FY14 FY15 FY16 FY17
All Companies
 Income 10.0 5.3 1.4 6.6
 Expenses 9.9 5.4 1.5 7.1
 Net profit -2.5 1.6 -12.6 18.7
 PAT margin (%) 3.1 3.2 2.9 5.7
 Assets 12.3 9.4 9.8 8.3
 Net worth 9.6 8.7 10.8 7.2
 RONW (%) 6.1 6.1 5.1 8.3
 Count of Cos. 24,439 24,353 22,049 8,816
Non-financial Companies
 Income 9.7 4.5 0.5 6.4
 Expenses 9.4 4.6 -0.3 7.6
 Net profit -3.1 -5.5 12.5 11.8
 PAT margin (%) 2.2 2.1 2.6 5.3
 Net fixed assets 11.7 13.3 15.6 7.3
 Net worth 8.2 7.1 11.2 5.3
 RONW (%) 5.0 4.9 5.4 9.0
 Debt / Equity (times) 1.1 1.1 1.1 0.8
 Interest cover (times) 2.0 1.9 2.0 2.9
 Net working capital cycle (days) 69 67 65 52
 Count of Cos. 19,688 19,805 18,467 6,761
Numbers are net of P&E
Updated on: 21 Jan 2018 12:27PM

Data added for HPI at Assessment prices and HPI at Market prices