savings and investment patterns in india
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1
A STUDY ON
SAVING & INVESTMENT PATTERN OF PEOPLE IN INDIA
A Presentation By: Market Xcel Data Matrix Pvt Ltd16, Sant Nagar, Delhi-110065
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…
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
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.
5
Demographic Profiling…
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
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
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
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
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
11
Savings And Investments
Concept Testing
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?
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
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
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.
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
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?
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
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
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
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
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
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
24
Way Forward
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
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
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
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”
29
Thank You