savings and investment patterns in india

29
A STUDY ON SAVING & INVESTMENT PATTERN OF PEOPLE IN INDIA A Presentation By : Market Xcel Data Matrix Pvt Ltd 16, Sant Nagar, Delhi-110065 1

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Page 1: Savings and Investment patterns in India

1

A STUDY ON

SAVING & INVESTMENT PATTERN OF PEOPLE IN INDIA

A Presentation By: Market Xcel Data Matrix Pvt Ltd16, Sant Nagar, Delhi-110065

Page 2: Savings and Investment patterns in India

2

The Indian consumer is changing and evolving. And, so are his consumption and investment patterns. As

Indian buyers loosen their purse-strings and are less reluctant to investing in unconventional investment

options, the entire investment story is getting redefined

The familiarity and usage of investment options in metros and high growth towns is high. People are

increasingly investing and multiplying money through various investment options. We at Market Xcel

targeted small towns to see how the current and potential investors think and act there

We covered 24 towns in total. The characteristics that make these cities lucrative for our study are:

Rising per capita income among the masses

High degree of quest for status and economic advancement

Includes major tourism destinations thereby uplifting the economy

Strategic location to set up manufacturing units – exemplified by Government initiatives

Highly price sensitive markets although have a good amount of propensity to spend

Not an early adopter of new things but have high desire of owning established brands, high

potential as the expansion activities, specific industry set ups etc. are taking place in these cities,

having a multiplier effect on growth and revenue flow

Research Background…

Page 3: Savings and Investment patterns in India

3

Research Objective & Process…

The key research objective can be defined as :

To understand the saving and investment pattern of small town consumers. Key Information Areas being:

A

• Demographics- Personal and household incomes, residing pattern

B

• What drives investors to use different investment options available and what could be the motivators- reasons for saving money/making long term investments

C

• Sources of information/key Influencers

D

• Financial investment options aware of, ever instead in, future potential

Page 4: Savings and Investment patterns in India

4Sample Design…

Targeted Achieved

NORTH

Amritsar 160 160

Jalandhar 160 163

Agra 160 162

Varanasi 160 162

Panipat 160 163

Srinagar 160 161

EAST

Asansol 160 160

Bhubneshwar 160 160

Guwahati 160 160

Jamshedpur 160 161

Patna 160 161

Ranchi 160 169

WEST

Indore 160 160

Nasik 160 163

Goa 160 162

Rajkot 160 162

Aurangabad 160 163

Bhopal 160 163

SOUTH

Mangalore 160 160

Coimbatore 160 164

Thiruvananthapuram 160 160

Madurai 160 160

Mysore 160 160

Vizag 160 160

 Total   3840 3879

• To achieve the study objectives we specifically targeted Emerging and nascent cities across four geographical

zones of India. 6 cities in each zone was covered in the survey.

Definition:Emerging cities: - These cities are characterized by factors like growing income, rising aspirations, scarcity of branded stores and growing corporate activities. Nascent cities: - These cities reflect low per capita incomes and limited corporate activity. The consumers of these cities are more price conscious and have a very low propensity to experiment new brands.

Page 5: Savings and Investment patterns in India

5

Demographic Profiling…

Page 6: Savings and Investment patterns in India

6 Profiling…

N=3879

56%30%

14%

21yrs - 34yrs 35yrs - 45yrs46yrs - 55 yrs

10%

27%

30%

32%

SEC A1 SEC A2 SEC B1 SEC B2

88%

12%

Male Female

29%

71%

Never Married Married

Gender

Age

SEC

Marital Status

• No specific quota was followed in terms of age, SEC, Gender and Marital status. Higher participation of male audience was a natural outcome.• More than 50% of the audience belong to 21 – 34 years

Page 7: Savings and Investment patterns in India

7 Profiling Cont…

45%

14%

40%

1%

Nuclear Family Nuclear family with elders

Joint family Single person/ sibling/ other

1-2 3 4 5 or more

3%

15%

32%

50%

2%

88%

9% 1%

Staying alone/ with friends at a different locationStaying with entire familyStaying with some members of family

N=3879Family Structure

Staying Pattern

Family Members

• To achieve the study objective it was imperative to understand the residing pattern of the people as the lifestyle directly impacts expenses, saving and investment pattern

• The living pattern implies the commitments related to family. Hence, the respondent would first meet family’s expenses, then save and invest.

A significantly high number of

respondents stay with the family

The number of family members is 4 or more

in maximum of our cases

Page 8: Savings and Investment patterns in India

8 Profiling Cont… - CWE

Shopowner

Clerical / Salesman

Businessman/Industrialist with no employees

Supervisory Level

Officer/Executive - Junior

Businessman/Industrialist with 1-9 employees

Officer/Executive - Middle / Senior

Self-Employed Professional

Skilled worker

Petty trader

Businessman/Industrialist with 10+ employees

33%

17%

11%

10%

9%

6%

5%

4%

3%

3%

1%

2%

26%

10%

56%

6%

School 5-9 years

SSC / HSC

Some college but not Graduate (Incl. Diploma)

Graduate / Post graduate

Graduate / Post graduate - Professional

N=3879

Occupation Education

• Chief wage earner’s occupation and education were measured primarily to confirm the Socio Economic Class

Page 9: Savings and Investment patterns in India

9

31%

20%

13% 12%

8% 9%6%

1%

Profiling Cont…- RespondentN=3879

Occupation

• We achieved a fair representation of different occupational profiles. 31% of our respondents were businessmen, 20% were private employees, 12% were into government job and so on

Page 10: Savings and Investment patterns in India

10 Profiling Cont… - Income

Upto Rs 10000 Rs 10001-Rs 15000

Rs 15001 Rs 20000

Rs 20001 - Rs 25000

Rs 25001 - Rs 30000

Rs 30001+ Refused

17%

28%25%

16%

8%4% 2%

32%

22%

15%

8%

3%1%

19%

Household Self

N=3879

• The incomes were in line with city profile. We did not happen to meet people that belong to high income group

Page 11: Savings and Investment patterns in India

11

Savings And Investments

Concept Testing

Page 12: Savings and Investment patterns in India

12 Investment Options…

• 54% of the audience have cited to have made investment in long term options• East has got the highest percent of audience (60%) – who have cited to have made investment in long term options• People from North show a slightly different investment pattern. More number of people invest in short term investment options than any other center

Overall(n=3879)

North(n=971)

East(n=971)

West(n=973)

South(n=964)

54%

44%

60%56% 56%

25%

38%

19% 19%25%

21%18%

21%25%

18%

Long Term investment purpose Short Term investment purpose Both long and short term investment purpose (blend of investment plans)

Q1. What is the common tenure you make investments for?

Page 13: Savings and Investment patterns in India

Parameters Overall North East West South

Base 2890 602 787 788 713

To arrange for inflation in the future

To maintain the standard of living even when at old age

To make provisions for my future

Tax Savings

Insurance

Investment (for growth of money)

Good rate of return (high rate of return)

Safety of my money (Principal amount is safe)

Stability of the returns (Regular return on investment)

• Investments has emerged as the largest reason at Aided level (67%). However, at an overall level it is “Making provisions for future” is the most common reason. A major chunk of Northern people make savings to save tax.

• The graph reflects that savings are led by a number factors- inflations, safety, growth, insurance, tax saving, control future etc.

13

13%

51%

85%

14%

24%

21%

30%

21%

7%

74%

34%

12%

49%

63%

74%

61%

62%

56%

54%

24%

47%

12%

32%

15%

17%

16%

2%

36%

68%

52%

67%

59%

74%

79%

74%

56%

24%

42%

51%

10%

12%

34%

49%

44%

21%

38%

9%

18%

42%

47%

61%

51%

56%

55%

19%

16%

48%

12%

19%

33%

32%

18%

14%

59%

37%

54%

47%

56%

59%

56%

61%

44%

28%

33%

58%

12%

22%

26%

32%

25%

11%

52%

37%

34%

51%

56%

67%

62%

63%

53%

Reasons for saving money… Base: Those who invest in Long term options OR both Long and Short Term options

Q2. Please tell what are your reasons for saving money? Q3. I will now read out to you some of the reasons that people like you have mentioned as the reasons for saving money. Which of these is applicable to you?

Aided Unaided

Sum of percentages may exceed 100 on account of multiple responses

Page 14: Savings and Investment patterns in India

14

• We asked the same question for long term investments to find out the relationship between savings and long term investments. The reasons for making long terms investment and savings are on similar lines. “Growth of money “and “ To fight inflations” are the most prevalent reasons for making long term investments. At an aided level “Provisions for future has emerged as the largest reason for making long term investments

Reasons for Long Term Investments… Base: Those who invest in Long term options OR both Long and Short Term options

Q4. What are your reasons for investing in long term investment options? UNAIDED. Q5. I will now read out to you some of the reasons that people like you have mentioned as the reasons for making long term investments. Which of these is applicable to you?

Parameters Overall North East West South

Base 2890 602 787 788 713

To arrange for inflation in the future

To maintain the standard of living even when at old age

To make provisions for my future

Tax Savings

Insurance

For growth of money

Good rate of return (high rate of return)

Safety of my money (Principal amount is safe)

Stability of the returns (Regular return on investment)

54%

42%

61%

38%

13%

57%

14%

11%

3%

34%

35%

49%

51%

18%

14%

56%

65%

42%

58%

37%

47%

43%

30%

74%

19%

17%

3%

37%

36%

51%

56%

24%

16%

78%

72%

59%

58%

42%

51%

54%

12%

50%

18%

18%

2%

24%

29%

38%

56%

17%

22%

42%

48%

57%

61%

31%

54%

42%

17%

52%

12%

19%

5%

18%

26%

34%

52%

19%

23%

58%

58%

61%

58%

38%

53%

44%

18%

58%

16%

16%

3%

28%

32%

43%

54%

20%

19%

59%

61%

55%

Aided Unaided

Page 15: Savings and Investment patterns in India

15

Parameters(Figures in %)

BASE* Rank – 1 Rank – 2 Rank – 3

To arrange for inflation in the future 2502 23% 6% 10%

To maintain my standard of living even when I am not working in the old age 2022 20% 21% 16%

To make provisions for my future 2800 45% 18% 13%

Tax Savings 3142 12% 16% 9%

Insurance 1091 12% 21% 16%

Investment (for growth of money) 2240 12% 23% 23%

Good rate of return (high rate of return) 2160 8% 19% 24%

Safety of my money (Principal amount is safe) 2240 10% 16% 24%

Stability of the returns (Regular return on investment) 1687 3% 5% 16%

Reasons for Making Investments – Top 3

n = 2890* BASE is of all those respondents who have stated these options at Unaided or Aided level

• “To make provisions for my future” (45%) is stated as the key reason for investment followed by “To arrange for inflation in the future” (23%)

Q6. Please rank the top 3 reasons which are the most important ones for you.

Page 16: Savings and Investment patterns in India

16 Influencers for final Investment options…

• 80% of the audience use their own knowledge for decision making on financial investments. Spouse’s opinion has a huge role in decision making• North has shown a higher percentage with 93% of the audience use their own knowledge. Expert opinion also matters a lot

Q7. For making decision about investing money in various investment options, who are the people/ sources around you which you consult in order to seek more information before taking the final investment decision?

Overall

North

East

West

South

80%

93%

63%

86%

78%

27%

17%

47%

21%

23%

3%

5%

1%

4%

1%

2%

2%

3%

1%

30%

48%

28%

18%

26%

22%

31%

8%

25%

23%

3%

2%

4%

3%

2%

1%

1%

1%

27%

32%

24%

27%

23%

Key Influencers

Use own knowledge Spouse Parents Children Relatives Friends Investment / Insurance Advisors

Financial consultant Expert views

Page 17: Savings and Investment patterns in India

17 Intention to continue with long term investments…

• Almost everyone would continue investing in long term investment options

Overall(n=2890)

North(n=602)

East(n=787)

West(n=788)

South(n=713)

96%

100%

89%

99%

97%

Future Intention

Yes

Q8. You have mentioned that you invest in long term financial investment options. Will you continue investing in the long term investment options in future?

Page 18: Savings and Investment patterns in India

18Awareness for Financial Investment options – Aided

Financial Investment Options Overall North East West South

BASE 2774 602 700 780 692

PPF (Bank or Post Office)

Indira Vikas Patra

National Saving Certificate

Post Office Monthly Income Scheme

Bank Fixed deposit

Company Fixed Deposits

Fixed Deposit (Post Office)

Mutual Fund

Unit Linked Insurance Plan (for investment and insurance)

Traditional Life Insurance Policy (for guaranteed returns )

Infrastructure Bonds

Stocks and shares

Gold ETF

Exchange Traded Funds (ETFs)

• Bank fixed deposits, National saving certificates, life insurance plans, mutual funds and post office deposits are popular modes of investments• People are quite aware of long term investment options available

57%

79%

85%

52%

100%

32%

82%

89%

39%

89%

17%

61%

28%

5%

65%

69%

88%

56%

100%

44%

70%

85%

44%

86%

13%

63%

22%

10%

56%

87%

96%

58%

99%

38%

86%

88%

48%

89%

22%

54%

18%

8%

54%

91%

78%

48%

100%

19%

81%

89%

29%

90%

16%

61%

53%

52%

68%

78%

46%

100%

27%

91%

93%

34%

89%

18%

65%

21%

2%

Q9. What are the financial investment options you are aware of?

* BASE is of all those respondents who have shown their intention to invest in long term options in future

Page 19: Savings and Investment patterns in India

19Financial Investment Options-Ever Invested

Financial Investment Options Overall North East West South

BASE 2774 602 700 780 692

PPF (Bank or Post Office)

Indira Vikas Patra

National Saving Certificate

Post Office Monthly Income Scheme

Bank Fixed deposit

Company Fixed Deposits

Fixed Deposit (Post Office)

Mutual Fund

Unit Linked Insurance Plan (for investment and insurance)

Traditional Life Insurance Policy (for guaranteed return )

Infrastructure Bonds

Stocks and shares

Gold ETF

Exchange Traded Funds (ETFs)

• Bank fixed deposits are the most prevalent option among target audience. 93% have stocked money in Fixed deposits at some point of time• Close to half of interacted audience have invested in life insurance policy as well. This indicates safety and secure future derive investment decisions

27%

8%

25%

18%

93%

4%

29%

26%

13%

49%

13%

26%

2%

40%

20%

24%

18%

98%

5%

32%

25%

16%

54%

12%

34%

2%

1%

22%

5%

27%

19%

89%

6%

25%

23%

17%

44%

16%

25%

24%

5%

28%

21%

91%

3%

24%

27%

8%

42%

12%

22%

5%

21%

2%

22%

12%

95%

1%

34%

30%

12%

55%

13%

24%

1%

Q10. Which of these have you ever invested in

* BASE is of all those respondents who have shown their intention to invest in long term options in future

Page 20: Savings and Investment patterns in India

20Financial Investment Options – Invested in Last 1 Year

Financial Investment Options Overall North East West South

BASE 2774 602 700 780 692

PPF (Bank or Post Office)

Indira Vikas Patra

National Saving Certificate

Post Office Monthly Income Scheme

Bank Fixed deposit

Company Fixed Deposits

Fixed Deposit (Post Office)

Mutual Fund

ULIP

Traditional Life Insurance Policy (for guaranteed return )

Infrastructure Bonds

Stocks and shares

Gold ETF

Exchange Traded Funds (ETFs)

• The investment pattern has remained similar for last year too. Stocks and shares and mutual funds have generated more interest as a good number of people have invested in these instruments during last one year

0.1375

0.08

0.08

0.3275

0.01

0.0925

0.1475

0.04

0.2375

0.0425

0.11

0.0175

0.22

0.1

0.09

0.23

0.01

0.17

0.17

0.06

0.23

0.04

0.12

0.02

0.12

0.09

0.09

0.29

0.02

0.07

0.16

0.04

0.22

0.06

0.11

0.11

0.08

0.1

0.34

0.09

0.12

0.02

0.16

0.04

0.1

0.04

0.1

0.05

0.04

0.45

0.01

0.04

0.14

0.04

0.34

0.03

0.11

0.01

Q11. In which of the following options have you invested in the last one year?

* BASE is of all those respondents who have shown their intention to invest in long term options in future

Page 21: Savings and Investment patterns in India

21Financial Investment Options – Proportion of Investment

Financial Investment Options Overall North East West South

BASE 2774 602 700 780 692

PPF (Bank or Post Office)

Indira Vikas Patra

National Saving Certificate

Post Office Monthly Income Scheme

Bank Fixed deposit

Company Fixed Deposits

Fixed Deposit (Post Office)

Mutual Fund

ULIP

Traditional Life Insurance Policy (for guaranteed return )

Infrastructure Bonds

Stocks and shares

Gold ETF

Exchange Traded Funds (ETFs)

• People seem to have tendency to put the surplus money in fixed deposits• A significant amount was also invested in PPF, NSC, infrastructure bonds and stocks

0.15

0.1375

0.0625

0.275

0.175

0.0425

0.03

0.0675

0.125

0.0875

0.0075

0.1

0.19

0.1

0.5

0.18

0.07

0.04

0.05

0.19

0.08

0.02

0.19

0.09

0.03

0.17

0.1

0.05

0.04

0.09

0.18

0.1

0.01

0.21

0.08

0.01

0.24

0.26

0.04

0.03

0.03

0.08

0.07

0.1

0.19

0.11

0.19

0.16

0.01

0.01

0.1

0.05

0.1

Q12. What proportion of the total investment that you made in the last 1 year goes to the various investment options?

* BASE is of all those respondents who have shown their intention to invest in long term options in future

Page 22: Savings and Investment patterns in India

22Financial Investment Options – Future Intentions

Financial Investment Options Overall North East West South

BASE 2774 602 700 780 692

PPF (Bank or Post Office)

Indira Vikas Patra

National Saving Certificate

Post Office Monthly Income Scheme

Bank Fixed deposit

Company Fixed Deposits

Fixed Deposit (Post Office)

Mutual Fund

ULIP

Traditional Life Insurance Policy (for guaranteed return )

Infrastructure Bonds

Stocks and shares

Gold ETF

Exchange Traded Funds (ETFs)

• The new modes of investments- Stocks and shares, Infrastructure bonds, mutual funds seem to be attracting a lot of attention. A major proportion of respondents indicated their intentions to invest in the specified modes in near future

• Bank fixed deposits are still most desired• Rest of the options are losing sheen

0.1725

0.035

0.0575

0.8375

0.0075

0.1

0.45

0.0625

0.48

0.37

0.6375

0.05

0.0525

0.32

0.04

0.08

0.8

0.01

0.08

0.45

0.1

0.56

0.45

0.55

0.04

0.06

0.12

0.03

0.04

0.78

0.02

0.09

0.34

0.06

0.38

0.44

0.67

0.06

0.04

0.15

0.02

0.05

0.88

0.11

0.56

0.04

0.43

0.21

0.55

0.09

0.1

0.05

0.06

0.89

0.12

0.45

0.05

0.55

0.38

0.78

0.01

0.06

Q13. Which of these do you plan to invest in the current financial year?

* BASE is of all those respondents who have shown their intention to invest in long term options in future

Page 23: Savings and Investment patterns in India

23 Amount invested in last 1 year…

• Though, people have strong desire to try out different investment options, the current level of investment is little small. People like to make small investments particularly in East

• People from North have invested comparatively higher amount in long term investment options

Q14. How much money have you invested in the last one year (in Rupees)?

Overall (n=2774)

North (n=602)

East (n=700)

West (n=780)

South (n=692)

33%

9%

71%

34%

19%

33%

37%

5%

44%

45%

13%

17%

11%

7%

17%

5%

10%

8%

17%

37%

3%

15%

11%

Upto Rs 25,000 Rs 25,001 – Rs 50,000 Rs 50,001 – Rs 75,000 Rs 75,001 – Rs 1,00,000 More than 1,00,000

* BASE is of all those respondents who have shown their intention to invest in long term options in future

Page 24: Savings and Investment patterns in India

24

Way Forward

Page 25: Savings and Investment patterns in India

25Summary• Amid the worsening economic scenario during 2011-2012, Indian investors from smaller cities showed confidence in

investing. Small town investors understand the significance of making investments as much as large town dwellers. The

definition of savings and investments seems identical and led by factors that revolve around:

– Secure future

– Way to fight inflation

– Safety of money

– High rate of return and

– Insurance

– Maintaining a particular level of lifestyle is not among the drivers

• According to Association of Mutual Funds in India (Amfi), between September 2011 and March 2012, proportion of assets

contributed by Tier-I, II & III cities and smaller towns in assets under management (AUM) of the Indian mutual fund industry

increased 3.63 per cent to 28.88 per cent. In absolute terms, these regions contributed Rs 7,500 crore more to the

industry's AUM.

• On BSE, the share of investors from cities such as Rajkot, Ahmedabad, Bangalore, Indore, Jaipur, Patna and Ludhiana has

grown more than three-fold, although on a smaller base

• Churn in investment from small towns is lower and they invest for a longer term. In bigger cities there are more distributors,

independent financial advisors and banks, which eventually lead to lot of churning. However, in small towns people rely less

on other’s advise.

• Life is stable and family is key to investment decision. The amount spent is generally the surplus out of meeting family

expenses and commitments

Page 26: Savings and Investment patterns in India

26…Summary…

• Deposits at banks and post offices have been major investment avenues so far and continue to remain so in near future

• However, non-conventional modes are picking up fast. 64% of survey participants said they intend to invest in stocks and

shares, 37% would like to invest in infrastructure bonds. This indicates a huge scope for financial companies and

advisors

• Compared to large towns the respondents look confident. They take their own investment decisions. Multiple sources of

information are generally not referred to. However, the experts opinions are given due importance. Though, the tendency to

consult financial investors is low, the expert opinions are sought through television, newspapers etc.

• The major investment portfolio is undertaken by larger audience include Traditional Life Insurance & Bank Fixed Deposits

• The idea is to increase the awareness level and promote the gamut of offerings

• Key motivators to invest would be the credibility of the brand and the confidence in assured return on investment with

safety of money

• Low awareness hence low off take thus need to take up promotional activities to increase visibility

• The platform is missing hence we advocate disseminating clear information and benefits…market competitiveness in no

way discourages players from entering as the segment is seen to be offering huge potential in future

• People from small towns are more than willing to invest if one makes products available to them with good advice. The

Page 27: Savings and Investment patterns in India

27…Summary

• People from small towns are more than willing to invest if one makes products available to them with good advice. The fact

is reiterated from the fact that:

– Top five brokers in the country have over 50% of their Clients outside the six metros

– Nearly 51% of all IPO applications now come from outside the big cities

– About 40% of the equity-based mutual fund applications are from the non-metros

– Active demat accounts are being operated in 73% of all pin code areas

– Purulia and Hamirpur have more demat accounts than Gurgaon

• The risk-averse middle class is slowing shifting from fixed income avenues such as fixed deposits and small saving

instruments as fallen returns are looking too low to take care of retirement needs. The same growth can be fuelled if the

investors are reached through proper medium and due guidance is provided

Page 28: Savings and Investment patterns in India

28What Do Financial Institutions Need To Have ?

• It is evident that audience look for ….

– A ‘popular’,..’around’…. product in which they can trust

– Reliable products with consistent returns

• A trustworthy…Reliable name

• The task is to:

• Build Awareness- Should make general public aware of the various products via different communication media with

higher listenership/viewership

• Provide Rational Offering + Emotional Connect

• Rational : Secure and offering consistent returns

– Move the focus towards small investors

• Based on the insight that today’s consumer are opting for Mutual Fund, Stocks & Shares - hence does

require strong reassurance here

– Decode “The product offerings to make it a real smart choice for the small town investors”

• “Product uniqueness” and “Brand Assurance” makes it easier for the channel to ‘sell’ it to the end

consumer

– This could also effectively use ‘Security of investment’ & “Credibility of institution”

Page 29: Savings and Investment patterns in India

29

Thank You