Winning Bizness Desk

Mumbai. Over the past decade, Indian households have seen a significant increase in their wealth, totaling around Rs 717 lakh crore. Interestingly, about 11% of this rise came from returns on equity investments, which, according to a Morgan Stanley study, have outperformed traditional assets like real estate and gold over the long term. This study underscores how equities have been a rewarding choice for Indian investors seeking higher returns.

Equity Outshines Other Investments Over 25 Years

Data shows that, in any five-year period over the last 25 years, equity investments have delivered the highest returns among asset classes. According to the Morgan Stanley report, Indian equities, represented by the BSE Sensex, have consistently outperformed real estate, gold, treasury bonds, and fixed deposits. Specifically, over a 25-year period, equity investments yielded a compounded annual growth rate (CAGR) of 15% before taxes. In comparison, gold delivered 11.1%, bank fixed deposits 7.3%, and property values in seven major Indian cities rose by just 7%.

Key Highlights from Morgan Stanley’s Report

Morgan Stanley’s findings shed light on how Indian families are reaping substantial gains from equity investments, though their equity exposure remains low. Over the past 10 years:

• * Indian families earned about Rs 84 lakh crore from the stock market with an investment of just 3% of their wealth.
• * Including the wealth generated by new company founders, Indian households' overall income over the decade reached Rs 819 lakh crore.
• * Equity earnings comprised about Rs 1 lakh crore, with a significant portion of this return being earned by company promoters.
• * Despite the returns, equity investors have had to navigate high market volatility of 30.7%, compared to just 11.3% in gold and 1.6% in bank fixed deposits.

Equity Investments Expected to Rise in Coming Years

Morgan Stanley economist Ridham Desai expressed confidence in the report, stating that Indian families are likely to increase their investments in equity. Presently, households invest just 3% of their assets in equities, but this is projected to rise above 10% in the near future as more families recognize the long-term benefits of equity investments.

Growing Participation from Retail Investors

The report also highlights a growing trend in retail participation in the Indian stock market. Over the past decade, retail investors' share in Indian equities increased by 8%, rising from 15.7% in 2013 to 23.4% today. This indicates a broadening interest among average Indian families to engage in stock market investments.

Market Cap Quadruples Over 10 Years

In terms of market size, the combined market capitalization of all listed companies in India has grown 4.5 times over the last decade. From Rs 101 lakh crore in March 2014, it reached around Rs 437 lakh crore. On September 27, 2024, the market cap touched a record high of Rs 477 lakh crore, positioning India as the world’s fifth-largest stock market. Moreover, India's share in the global market cap has risen to 4.3% this year, a significant jump from 1.6% in 2013.