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A decade back if you would had asked any Indian where do they invest? The most common answer you would have got is gold or real estate or fixed deposits. 

Fast forward to today Indians are ditching traditional asset classes and are moving towards financial assets such as stocks and mutual funds. This is visible from the fact that the number of demat accounts which stood at 1.8 crore in 2011 almost tripled to 5.12 crore in January 2021. According to various media reports, of the 5.12 crore accounts more than 1 crore, demat accounts were opened in the first 10 months of FY2021. And the action in new account opening is shifting from metros to tier-II and III cities. 

Commenting on the new account opening India’s largest depository CDSL’s Chairman BV Chaubal said, “it is heartening to note that the focus of registration of new demat accounts is shifting from metros to tier II and tier III cities, which is indicative of the deepening and widening of the Indian Capital Market. In the 21st century, riding on financial technology, this crisis has brought the opportunity to accelerate digital innovations.”

A demat account is used to hold shares and securities in an electronic form rather than on paper. 

The primary reasons for this shift are falling interest rates, COVID-19 induced lockdowns forced Indians to look for supplementary income and equity markets recovering faster than expected.

Likewise, the investments in mutual funds are also rising. Assets under management of the Indian Mutual Fund industry has grown 4.5-fold from Rs 6.9 lakh crore on January 31, 2011, to Rs 30.50 lakh crore in January 2021. At the same time mutual fund folios, a parameter for gauging the number of investors also more than doubled from 4.3 crore in March 2011 to 9.52 crore in January 2021. 

SIP, the most affordable way of investing in a mutual fund, also saw its contributions doubling from Rs 43,921 crore in March 2017 to Rs 79,370 crore between April 2020 to January 2021. In fact, the number of SIP accounts alone has risen by 44 lakh in the last ten months to 3.55 crore as of January 2021. 

Sunil Subramaniam, MD & CEO of Sundaram AMC said, “Retail investors are observing the news flows on the economy and on the covid front things are getting better and the fact that the stock market indices have doubled since the March lows. The lockdown has also helped customers to get comfortable with digital modes of operations which has helped advisors to acquire more customers at a lower cost and a faster timeframe.”

Looking at the numbers it would not be wrong to conclude that Indians have embarked upon a journey towards wealth creation by financializing their savings.