Indian households are investing more in stocks than it may seem
₹86.2 trillion. Of this, ₹31.6 trillion flowed into fixed deposits of banks and other institutions, while ₹5.1 trillion flowed into mutual funds (MFs) and stocks, amounting to about 6% of the overall flow. Given this, the remaining 94% went into fixed-income investments, like life insurance schemes, provident and pension funds, fixed deposits and small savings schemes.
Now this is a slightly lazy interpretation of data, something that social media thrives on. First, a part of the premium collected by insurers from households is invested in stocks. Data from Bloomberg suggests that Life Insurance Corporation (LIC) of India had investments in close to 300 stocks as of December 2023.
Along with this, private insurance companies also invest in stocks. Second, the Employees’ Provident Fund Organisation (EPFO) invests a part of the contributions made by individuals in stocks. In August 2022, the government had stated in the Lok Sabha that 85% of the contributions are invested in debt instruments and 15% in exchange traded funds (ETFs), which invest in stocks that make up indices like the BSE Sensex and NSE Nifty.
In August 2023, the government shared data showing that the EPFO had invested a total of ₹1.29 trillion in ETFs from April 2020 to March 2023. The EPFO started investing in stocks only in 2018-19. Other than the EPFO, the National Pension System also invests in stocks indirectly.
Third, all the household money coming into MFs isn’t necessarily going into equity funds that invest in stocks. While keeping the third point in mind, the money indirectly being invested in stocks through the first two routes needs to be taken into account as well. Once that’s done, it’s safe to say that there is more household money going
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