RETURN OF THE EQUITY CULT: IS IT HERE TO STAY?

Indian households have never been big fans of the stock market. In a few states like Maharashtra, Gujarat, Rajasthan and Kerala, there may be a widespread culture of buying stocks but outside of that, the average Indian household has generally eyed stock investing with suspicion and mistrust. A pitifully low 4% of aggregate Indian household savings is in equities. But that may be changing.

The darkest hour for equities was around the global financial crisis of 2008. Many stock portfolios plunged 50-70%, investors sold in panic and the foundation of equity, as an asset class, was shaken to the core. Indian investors lost their faith, pulling out 1.7 lakh crores out of the stock market between 2010 and 2015. But as they say in the stock market, the darkest hour is just before dawn.

Over the last two years, the tide has been turning. Indian savers are warming up to equities again and this time it looks like the real thing, not just a passing infatuation. Wisely, this time, most investors seem to have chosen expertise over excitement — entrusting professional mutual fund managers with their savings rather than taking wild punts based on stock tips. The corpus of equity mutual funds has doubled, from 4.3 lakh crores in September 2015 to 8.6 lakh crores today. What is equally important is that investors have decided to make equity investing a regular habit, not a one time leap of faith. Systematic Investment Plan or SIP has emerged as the favoured mode of deployment. At last count, there were 1.7 crore active SIP accounts with equity mutual funds, with close to nine lakh accounts being added every month. The average ticket size may be only