Indian households are increasingly abandoning traditional savings methods in favour of more dynamic investment avenues, according to a recent analysis by Kotak Institutional Sharessupported by Bloomberg and company data. This shift is highlighted by the changing composition of household financial assets between 2014 and 2024, which marks a shift from savings to investment.
Uday Kotak, Chairman of Kotak ValuesKotak commented on the trend, stressing the need for a broader perspective on managing finances. “The saver becomes an investor in a rebalancing of household financial assets. Bank deposits rise from 53% to 42% between 2020 and 2024. The future is a holistic approach to financial services. It is time for a change in mindset,” Kotak said.
According to the data, there has been a notable decline in the share of bank deposits, comprising current accounts (CAs), savings accounts (SAs) and fixed deposits (FDs), from a dominant 53 per cent in 2020 to 42 per cent in 2024. This trend underlines a growing preference for stocks and mutual funds, which saw an increase from 10 per cent and 9 per cent in 2020 to 12 per cent each in 2024.
Greater diversification is evidenced by the doubling of investments in Portfolio Management Services or Alternative Investment Funds (PMS/AIF), rising from 1% in 2020 to 2% in 2024. Meanwhile, insurance and pension products have maintained a stable share, with slight growth over the period.
Indian Market Scenario
Recently, Institutional Box The equity analysis revealed that a few critical factors have been supporting these lofty valuations. The report highlights an enthusiastic sentiment among non-institutional investors, who tend to be less price sensitive, a solid macroeconomic environment and a positive outlook for future earnings as key factors contributing to the current market conditions.
Against this backdrop, Kotak Institutional Equities has observed that the Indian market currently exhibits limited investment value and stocks and sectors appear to be, on the whole, overvalued. The brokerage has segmented the market into three categories based on their valuation – sectors that are fairly valued, those that are fully valued and those that are considered to be in shaky territory.
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