Investment Still Traditional Across Segments, Stock Market Not the

First Choice: PHD Chamber

India's economy is on the high road to an ever-increasing growth. Economic indicators such as more
than average 7% real GDP growth during the last ten fiscal years (FY01-FY10) and a more than 8.5%
growth in real GDP in the last three quarters; rising foreign exchange reserves of close to US$296bn
(as on December 3, 2010); a booming capital market with the Sensex index near its all time high mark;
shining gold prices better than ever, peak reaching above Rs20,000 per/10gm; and with a FDI flow of
US$121bn during April2000 to September2010; also there has been a sharp acceleration in the
growth of per capita disposable income, almost doubled during the 2000s, well within the one
generation. India has emerged among the world's fastest growing wealth creators.

To understand the investment pattern of different demographic categories of individuals representing

the three segments of India, viz. rural, urban & metropolis, we conducted an All-India survey of more
than 1000 people. The census considered persons from four basic occupations viz. Agriculturists,
Businessmen, Professionals, and Salaried.

In all, a total of 206 people in the rural segment, 377 in the urban centres and 457 in the metro cities
were randomly surveyed. Occupation-wise, 223 people were chosen from the business pie, 276
among professionals, 385 from the salaried, and 156 among agriculturists.

Number of People Surveyed across Regions & Occupations

Demographics Businessmen Professionals Salaried Agriculturists Total

Rural 33 44 70 59 206
Urban 66 84 183 44 377
Metropolis 124 148 132 53 457
Total 223 276 385 156 1040
Source: PHDCCI, A Survey of Investment Patterns in India, December 2010

In the opinion poll, we found that people’s most preferred choices varied across different segments.
Rural India is more inclined towards investing in fixed deposits, while the Urban India and Metropolitan
India segments chose equity-linked insurance schemes over other investment tools.

Despite the stock market going through a boom period, most of the people opted for a traditional mode
of investment like fixed deposits; even professionals and businessmen have not opted for stock
market, as found during the survey.

1
Rural India

As we took a closer look at the bucolic India in the polls, we observed that fixed deposits are a popular
instrument of investment in rural India, more than 37% of the people surveyed concurred, followed by
the real estate (17%), equity-linked insurance schemes (15%), gold and silver (14%), Mutual funds
9%), others (6%), and stock market (2%),

Rural India

40%

35%

30%
Investment

25%

20%

15%

10%

5%

0%
Stock Mutual Equity Fixed Gold & Real Estate Others
Market Funds Linked Deposits Silver
Insurance
Scheme
Financial Instruments
Source: PHDCCI, A Survey of Investment Patterns in India, December 2010

Urban India

Taking a myopic look at the urban India survey that covered 377 people in all, equity-linked insurance
schemes and fixed deposits emerged as the most popular tools of investment, more than 24% of the
people surveyed concurred, followed by mutual funds (16%), stock market (11%), real estate (13%),
gold and silver (9%), others (3%)

Urban India

30%

25%

20%
Investments

15%

10%

5%

0%
Equity Fixed Mutual Stock Real Estate Gold & Others
Linked Deposits Funds Market Silver
Insurance
Scheme
Financial Instruments

Source: PHDCCI, A Survey of Investment Patterns in India, December 2010

2
Metropolitan India

On closer analysis, metro cities that include all the Class I cities like Ludhiana, Hyderabad, Bangalore,
etc. and metropolitan cities like Delhi, Mumbai, Chennai and Kolkata revealed that out of the 457
people polled, 22% preferred to invest their money in equity-linked insurance schemes and 20% in
fixed deposits followed by mutual funds (19%), stock market (16%), real estate (15%), gold and silver
(7%) and others (1%).

Metropolitian Area

25%

20%
Investment

15%

10%

5%

0%
Equity Fixed Mutual Stock Real Estate Gold & Others
Linked Deposits Funds Market Silver
Insurance
Scheme
Financial Instruments

Source: PHDCCI, A Survey of Investment Patterns in India, December 2010

All Over India

On an average, 25% people went for fixed deposits, 21% equity-linked insurance schemes, 16%
mutual funds, 15% real estate, 13% stock market, 8% gold & silver and 2% others.
All over India

30%

25%

20%
Investments

15%

10%

5%

0%
Fixed Equity Mutual Real Estate Stock Gold & Others
Deposits Linked Funds Market Silver
Insurance
Scheme
Financial Instruments

Source: PHDCCI, A Survey of Investment Patterns in India, December 2010

India needs effective channelisation of savings into investments to maintain the capital formation
around 35-40% of GDP and to reduce dependency on foreign capital flows. Capital requirement will
3
also be increasing in the coming years with the increasing GDP growth rate and improved economic
sentiment, said Mr. Salil Bhandari, President, PHD Chamber.

However, a large part of household savings around 52% is in the form of physical savings and
remaining 48% is in the form of financial savings. Moreover, a significant portion of households’
financial savings is parked in fixed deposits.

To deepen the penetration levels, we believe, there is a strong need to mobilize households’ savings
into market linked financial products – stock market, equity linked insurance, and mutual funds etc. We
need to create a conducive environment that will act as a catalyst and facilitate households’ higher
penetration into financial products, said Mr. Bhandari.

******************************************