The Signal – India – Towards A Wealthier Future

We’re half a year into the post-virus world, and the Indian equities are showing no signs of defeat. Its stellar run to be recognized as best performing market globally on year-to-date basis is received as delight to those who turned deaf to nay-sayers in the year prior.

The table below highlights the current euphoria enjoyed in the domestic currents: 

The valuation premium of the MSCI India index is at 55% and 12% by mid-June as against the MSCI Emerging Markets and MSCI World indices. It today stands above the five-year average premium of 45% and 8%, respectively. It is expected to stay elevated on the back of India carrying potential to become the fastest growing economy of the decade. Strong foreign ownership interest, dynamic shift of unorganized to organized sector, all-time high corporate profits, and supportive macro support, will be key in lending confidence to Indian socio-economic pattern to yield better-than-expected growth.

The holistic wealth growth pattern draws praise as it is expected to rise 39% over the next five years, reaching $583 trillion by 2025.

Low-&-middle income countries will be responsible for 42% of said growth, although they account for just 33% of current wealth. In fact, between 2000 and 2019, the wealth share of emerging economies more than tripled from 9.3% to 30.3%.

India and China are touted to be the heaviest and most influential contributors. Their cumulative growth is expected to touch 59.0% over the next five years, raising wealth per adult to $20,880. India’s progress on standalone basis is also noteworthy as its increased wealth eight-fold in the last two decades reaching $12.8 trillion in 2020.

However, the room to grow is plenty, as despite having four times the population of the USA, India’s is comparable to the level for the USA over 70 years ago. India’s wealth is expected to rise to $18.4 trillion in real terms in 2025, similar to the level in the USA in the mid-1960s. To put icing on the cake, India’s household wealth is set to overtake that of its former colonial ruler (UK) within the next five years.

As India gears to take the pedestal amidst peers on the global growth scale, it is also expected to be one of the fastest contenders in trickling down such wealth to those who invest or choose to stay invested. It is on track to give birth to record number of millionaires by 2025. The table below highlights the same:

A year of abnormality in markets equates to a chance of realizing abnormal returns in the markets. This is a key reason for birthing of multi-millionaires when countries are in the fag-end of dealing with the once-in-a-century pain-demic.

The wealth share of those who stay invested today account for one of the highest concentrated pockets amidst peers on the same statistic. The table below highlights the how much of the wealth the country’s richest 1% hold, of which the major generator is financial assets:

The importance accorded by HNIs and UHNIs to investing has been documented in great detail before. The graph below shines light on wealth patterns observed across hierarchical net-worth of clients:

In a financially volatile year like none before, investments across asset classes still contribute 50%+ of a HNI’s portfolio.

In encouraging investing amongst the Indian diaspora, RBI conducted a similar wealth distribution study earlier this year. The results of the same are highlighted below:

As can be seen, India has a long way to go in catching up with the ways-&-craze for affluence seen in the western sisters.

However, it is not all that bad as it appears to be…

The govt. in recent past has actively promulgated the idea of shaping India into a more fiscally-savvy body and bank. The sentiment is reflected in the growing millennial foray into financial assets from physical assets.

Easing of doing business while simultaneously welcoming digital payment interfaces has incentivized people and policies to augur higher financial inclusion.

A direct result of the action has been the growth of online commerce and broking companies. As reference, India saw unparalleled growth of demat accounts in Q1FY20 (24 Lakh – 10% of total live accounts in the country!) as investors looked to capitalized on iceberg-hit prices of titanic-like companies.

The latest move in easing norms for FinTech companies to set up their own AMCs is a step-ahead in the direction of India becoming the land of appreciation-&-action.

Knight Frank and its survey participants are wary of the same as India is set to cherish one of the highest growth rates in the forthcoming year and similarly over the next 5 years.

The table below highlights the same:

It is fair to make 2 observations from the comments made in the note so far:

• Indians are keen to capture the opportunities that markets present before themselves
• India is designed to be a mine of opportunities in the coming times

When the markets open come Monday, make sure you are the first in line to invest.

Pro Tip – with the fisdom app, you can be investment-ready in less than 5 minutes. And in 5 after, you can have made your 1^st successful investment via our recommended funds in the app!

That will still save you 20 minutes from the pizza coming your way to celebrate the initiation of your financial journey.

Most importantly you will have acted in-line with the true intentions of writing this note :– which is to re-define your behaviorism in accordance with the bigger-pocketed counterparts.

Remember, The right time to invest was yesterday, the next best time is now.

Follow principles of sound asset allocation and math magic of systematic investment plans (SIP) to invest into markets in a disciplined manner.

As a pro-tip, do know, it is not when you invest into the markets, but how long you stay invested for.

The biggest proof of this pudding is seen in Warren Buffett’s life story. The investing genius garnered majority of his USD billions in wealth after the age of 65!

And if there is one common goal all investors harbor, then that is to become the next Buffett. To do that, you need to invest today.

As India focuses on innovation, equities look to capture its benefits.
Your weekend quote – Get invested, Get richer. Stay Invested, Stay Richer

Till then, Wish you a happy weekend