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Wednesday, November 25, 2020

Less than 1% of rural households invest in stocks: Sebi survey

On a positive note, the survey found the investor base in India is increasing

By: ENS Economic Bureau | Mumbai | April 6, 2017 1:51:17 am
sebi, securities exchance board of india, stock market, stock market investment, stock market investment base, economy news, indian express The Securities and Exchange Board of India (Sebi). (File Photo)

Not even 1 per cent of rural households in India are investors in stock markets, indicating a total lack of awareness among people about this mode investment, a survey conducted by market regulator Sebi has revealed. “There are a mere 32 investors (0.234 per cent) amongst the 13,697 rural survey respondents. Of these investors, 21 (66 per cent) invest in mutual funds (MF), 4 (12.5 per cent) invest in equities and 7 (22 per cent) invest in bonds and debentures although none have ever invested in derivatives or futures,” the Sebi Investor Survey (SIS) said. However, 95 per cent of rural survey respondents have bank accounts, 47 per cent have life insurance, 29 per cent have post office deposits and 11 per cent save in precious metals.

Although the SIS data showcases a high propensity to save, these potential investors do not participate in the securities markets — possibly, due to a lack of awareness. “Almost all respondents are aware of bank deposits while 88 per cent and 76 per cent are aware of life insurance and post office savings, respectively. The awareness levels for MFs and equities are 1.4 per cent although less than 0.5 per cent are cognizant of futures, derivatives or debentures, it said.

According to the SIS data, nearly 40 per cent of the rural respondents earn more than Rs 20,000 per month while 24 per cent of households have a total savings of 40 per cent to 60 per cent of their annual income and a further 7 per cent have savings higher than 60 percent of their annual income. Although these households, which have the income levels and the tendency to save, can potentially participate in the securities markets, the percentage of investors is as low as that of the broader rural average.

Overall, including both urban and rural households, more than 95 per cent Indian households prefer to park their money in bank deposits, while less than 10 per cent opt for investing in mutual funds or stocks, the Sebi survey showed. The survey, conducted across urban and rural areas of the country, showed that life insurance (61.7 per cent) was second most preferred investment vehicle, followed by precious metals (30.3 per cent), post office savings (30.1 per cent) and real estate (16.5 per cent, as the top five investment options. MFs came at sixth place (9.7 per cent), followed by stocks (8.1 per cent), pension schemes, company deposits, debentures, derivatives and commodity futures (1 per cent) as investment vehicles for the urban households.

On a positive note, the survey found the investor base in India is increasing as nearly 75 per cent of the investors in the Sebi Investor Survey 2015 participated in the securities markets for the first time within the last five years. The survey was commissioned in the year 2015 and got completed last year, while its results were released today by the Sebi. Nielsen, a global leader in primary research, conducted and analysed the Sebi survey. The last survey was conducted in 2008-09.

Sebi said the survey first listed a set of 204,694 households and basic information about demographics, income, savings and investments were collected. In the second step, a subset of 50,453 amongst these listed households were chosen to conduct the final survey. The data was used to create an estimate of the total number of investing households at the end of 2015.

Using a bootstrapping methodology project, it was estimated that there were a total of 3.37 crore investor households in India. Of these, 70 per cent (2.37 crore) reside in urban areas while the other 1 crore were rural households.

Although nearly all the survey participants are staggeringly aware of bank deposits (99.9 per cent), life insurance (94.7 per cent) and Post Office Savings (89.4 per cent), familiarity with MFs and equities is just 28.4 per cent and 26.3 per cent, respectively. On the other hand, awareness of derivatives (10.4 per cent) and futures (9.5 per cent) is between savings schemes and investment instruments; cognizance about savings schemes is significantly higher.

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