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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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We are a tiny minority

Posted by Muthu on October 10, 2016

Wishing you and your family a very happy Saraswathi pooja.

The middle class in India is around 2% of the households. Elite & rich would be another 1%.

We roughly have 300 million households in India.

Out of this only 3% (9 million households) have the potential to invest in capital markets.

The total demat (including NSDL & CDSL) accounts in the country is 26 million. Many investors have more than one demat account. So direct equity investors in India will not be more than 13 million. Many investors have demat accounts in the name of their spouse, children and parents as well. So in all likelihood around 8 million families may have demat accounts.

Recently I read that CDSL have only around 1.25 lakh demat accounts with holdings above Rs.10 lakhs. Including NSDL, after removing duplication, around 2 lakh investors may hold shares worth more than Rs.10 lakhs. This is around 2% of the total investor households.

Coming to mutual funds, there are around 50 million folios. This includes both retail and institutional investors. An investor, on an average may hold around 4 funds. This means we have around 12 million investors. Many families have more than one person investing in mutual funds. This means around 6 million households.

There would be overlap of investors who both invest in mutual funds and also shares. So the total households in India who are investing in capital market would be around 8 to 10 million.

There are 10 million SIP folios investing Rs.3500 crores a month in capital markets. Again this may mean around 4 million investors and 2 million households.

You may be surprised to know that there are only around 5000 advisors (excluding insurance agents) in India.

In the absence of detailed data, we have to do certain approximation. Better to know something approximately than having no knowledge at all.

There are around 1.3 million people who read financial newspapers in India. The viewers of business channels are also around 1 million.

In such a huge country, we are a tiny minority.

That is why capital markets or its movements have no relevance or impact for a common man.

Even the optimistic estimates suggest that only 10% to 12% of Indian households would be middle class during next 2 decades. Adding elite and rich, around 15% of households have potential to become investors over next 2 decades. This is a best case scenario because we are assuming 8% economic growth for next 2 decades. Achieving this growth rate is no easy job.

Make use of the opportunity you have been provided to participate and grow your wealth in the equity market.

Don’t forget to count your blessings.

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