How DeMo changed the face of MF investment?

Indians by nature save a lot. Historically, we have seen that and going ahead there is no reason to believe otherwise. This is the area where we outscore many of the developed countries and even the global average. As of 2016, India’s gross domestic savings rate stood at 29 per cent, compared with the global average of 25 per cent.

Nevertheless, most of these savings were in physical assets such as real estate and gold. Of late it has been shifting towards financial assets. Net financial savings grew at a healthy pace of 9.9 per cent CAGR between fiscals 2013 and 2017, compared with savings in physical assets, which grew at a CAGR of 0.1 per cent. Commensurately, the proportion of net financial assets among the total household savings have seen a sharp rise from 31 per cent in fiscal 2012 to 42 per cent in fiscal 2017. As of fiscal 2017, the total household financial savings stood at Rs. 10.3 trillion.

Even in the financial savings, bank deposits cornered about two-third of the entire financial savings. On November 8, 2016, the Government of India announced phasing out of large-denomination currency notes (Rs. 500 and Rs. 1,000 notes to be precise) representing the bulk of the total currency in circulation, as legal tender. The process was also known as demonetisation. Post demonetisation, however, there has been changing in the saving behaviour of individuals in India. In the last two years, we have witnessed a quantum spurt in investments into capital markets, with the household allocation to shares and debentures increasing from 2 per cent in fiscal 2015 to 10 per cent in fiscal 2017.