Gold losing sheen as equities, realty boost India’s wealth

Hyderabad: For Indians, gold has been the most-preferred avenue for investment and wealth creation for centuries. That’s the key reason why the country has gradually emerged as the second biggest consumer of the yellow metal in the world. But this seems to be changing now with other alternatives like stock market and real estate investments gaining wider currency across the country.

A report brought by Karvy Private Wealth revealed that the total individual wealth in gold held by Indians grew by a meagre 3.86 per cent to Rs 68.45 lakh crore in the last financial year (2016-17) from Rs 65.90 lakh crore during 2015-16. But the growth in this space was four-fold higher at 15.31 per cent in FY16.

In comparison to marginal growth in gold wealth last fiscal, the total individual wealth in real estate sector went up by 8.62 per cent to Rs 60.25 lakh crore in FY17 as compared with Rs 55.47 lakh crore in FY16.

The upswing was much higher in direct equity segment. Last fiscal, individual wealth in direct equity zoomed 26.8 per cent to a massive Rs 37.58 lakh crore, reflecting a shift in the investors’ preferences. “Direct equity has been the pillar of individual wealth growth in FY17.

Not only has the wealth increased in this asset class, the positive sentiments have helped other sub asset classes such as mutual funds, pension funds also to grow at a rapid space,” said Abhijit Bhave, CEO, Karvy Private Wealth, here. Karvy’s report titled ‘India Wealth Report 2017’ estimated that the total wealth held by individuals in India went up by 11 per cent to Rs 344 lakh crore in FY17. This total wealth was Rs 310 lakh crore during 2015-16.

Financial assets including direct equity, which accounted for 59.27 per cent of the total wealth, grew by 14 per cent to Rs 203.9 lakh crore from Rs 177.8 lakh crore a year ago. The wealth in physical assets including real estate and gold saw 5.92 per cent rise to Rs 140 lakh crore from Rs 131.2 lakh crore a year ago. Physical assets contributed 40.73 per cent to the total wealth.

“Gold and real estate form 91 per cent of physical assets where individual growth is growing at a slower space,” the report said. The contribution of gold to physical assets came down to 48.86 per cent in FY17 from 49.83 per cent in FY16 while that of real estate increased to 43.01 per cent in FY17 from 41.94 per cent a year ago.

Bhave observed that growth in real estate sector was picking up thanks to reforms like RERA which would provide safety net for real estate customers.

Meanwhile, the wealth report predicted that total individual wealth would almost double to Rs 639 lakh crore by 2022, clocking a combined annual growth rate (CAGR) of 13 per cent. Financial assets will account for Rs 403 lakh crore or 63.09 per cent while physical assets will make a lower contribution of Rs 235 lakh crore or 36.91 per cent. “Going forward, financial assets are likely to sustain their dominance,” he said.

By P Madhusudhan Reddy