Shift of household savings to equities has just started

For long, we have lamented that the traditional Indian penchant for saving hasn’t translated into financial investments. Recognising the role of such investments in driving economic growth, the debate has centered around measures to encourage the financialisation of savings in India. Exempting long-term capital gains (LTCG) on equity investments is one such measure, and a good one.
 
Though this measure was instituted over a decade ago, in 2005, we are only now seeing some evidence of a shift in the way Indian households think of financial investments. Their savings in shares and debentures have begun to rise. Mutual funds (MFs) are becoming the favoured vehicle for investing in equities. This is evident in the quadrupling of MF folios in the past three years. We are seeing unprecedented flows through MF systematic investment plans (SIPs), and equity assets of domestic MFs are at an all-time high. The Indian stock markets are no longer dictated solely by foreign buying or selling.

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