Uday Kotak says as Indian households start to embrace stocks and mutual funds, savers turn into investors

Indian households are increasingly shifting away from traditional savings to more dynamic investment avenues, according to a recent analysis by Kotak Institutional Equities, backed by Bloomberg and company data. This shift is highlighted by the change in the composition of household financial assets between 2014 and 2024, signaling a shift from savings to investments.

Commenting on the trend, Uday Kotak, Chairman, Kotak Securities, stressed the need to manage finances with a broader perspective. “Savers turning into investors, rebalancing household financial assets. Bank deposits will fall from 53% to 42% between 2020 and 2024. The future will be a holistic approach to financial services. It’s time to change the mindset,” said Kotak.

According to the data, the share of bank deposits, including current accounts (CA), savings accounts (SA) and fixed deposits (FD), has declined significantly from a dominant 53% in 2020 to 42% in 2024. The trend highlights the growing preference for stocks and mutual funds, both of which have increased from 10% and 9% in 2020 to 12% in 2024.

Further diversification is reflected in the doubling of investments in portfolio management services or alternative investment funds (PMS/AIFs), from 1% in 2020 to 2% in 2024. At the same time, the share of insurance and pension products remains stable, with a slight increase during this period.

Indian Market Overview

A recent Kotak Institutional Equities analysis revealed a number of key factors underpinning these high valuations. The report highlighted enthusiastic sentiment among non-institutional investors (who tend to be less price sensitive), a strong macroeconomic environment, and a positive outlook for future earnings as the main factors behind current market conditions.

In this backdrop, Kotak Institutional Equities observed that the Indian market currently has limited investment value, with stocks and sectors generally overvalued. The brokerage has divided the market into three categories based on valuations: reasonably valued, fully valued and sectors considered to be in bubble territory.