Are Indian households overleveraged in the equity market?

economictimes.indiatimes.com:

equity exposure of the household (HH) sector despite a surge in equity mcap. India's mcap hit 146% of GDP in the quarter ended June 2024. In its July bulletin, RBI published its first- ever quarterly estimates of the financial wealth of HHs, including their holdings in the equity market. A month later, Sebi released a 'Working Paper on Household Savings through Indian Securities Market'.

Taking cues from these estimates, gross financial assets (GFAs) estimates, and outstanding liabilities of the HH sector, along with their equity exposure, were made. RBI's estimates up to FY23 were updated to Q1 FY25, incorporating additional information from Sebi's paper, which found:

• HH GFAs totalled 158% of GDP in Q1 FY25, compared to 124% at end-December 2019. HH debt stood at 42%, implying that the HH financial net worth was at an all-time high of 116%, compared to 89% in December 2019.

• Share of currency, deposits (including small savings) and insurance has declined in HH GFAs in the post- pandemic period, while it was broadly stable at a high level for provident and pension funds (P&PFs), but increased sharply for equity and investment funds.

• Indian HHs (promoters and non-promoters) held 21-22% of equity mcap in Q1 FY25, following the pre- pandemic share of 18-20%. They held another 8-9% of equity mcap indirectly through MFs.

Overall, HHs held about 30% of equity mcap (₹134 tn) in India in Q1 FY25, compared to 28% at end-2019, and 22% at end-2014. In other words, E&IFs accounted for 28% of HH GFAs in Q1 FY25, compared