The Hindu Business Line : Households investing more in stocks, MFs

The investment by households in shares, debentures, public sector bonds and mutual funds has seen a three-fold increase in 2005-06 at Rs 29,452 crore, compared to Rs 8,113 crore in 2004-05, according to data released by the Reserve Bank of India in its Handbook of Statistics on Indian Economy.

If outflows from UTI are left out, the fresh money inflow in shares and mutual funds in 2005-06 rose six-fold to Rs 29,008 crore (Rs 4,967 crore).

Only five per cent of total household money was invested in shares and mutual funds in 2005-06.

But this is significantly lower than the 12 per cent that households invested in the stock market and mutual funds during the stock market boom of 1994-95.

Conversely, though, the dotcom and stock market boom of 2000-01 saw only 4.11 per cent of household money entering the stock markets.

In 2005-06, the increase of inflow in provident and pension funds was marginal, to Rs 58,615 crore from Rs 56,354 crore the previous year.

In fact, a dip in inflows has been noticed in small savings instruments like National Savings Certificates or RBI relief bonds (mentioned as claims on Government in the document) from Rs 1,06,420 crore in 2004-05 to Rs 86,755 crore in 2005-06, accounting for a fall of 18.4 per cent.

Inflows into bank deposits have seen a significant rise at Rs 2,74,641 crore (Rs 1,58,259 crore).

This sector has largely contributed to the inflows into the financial markets.

As for loans taken by households from financial institutions, banks have seen a marked rise of 57 per cent in 2005-06 compared to the previous year.

However, increase in borrowing from other sectors such as Government and other financial institutions has witnessed a decline from the previous year.