Over the last three years the Indian stock market has
seen a near persistent bull run. Between November 23, 2011 and November
28, 2014, the closing value of the Sensex rose by 280 per cent, or an
average of more than 90 per cent a year. That signals the kind of yield
that the market would have generated even for those who had a portfolio
that replicated trends in the 30-stock Sensex.
Interestingly,
this was a time when households were cutting back on their financial
savings with the ratio of gross financial savings of households to GDP
falling from 15.1 per cent in 2009-10 to 10.3 per cent in 2012-13.
That
retreat has affected household exposure to stock markets as well, one
consequence of which is the extremely poor performance of the primary
market and the virtual absence of IPOs from all but the largest of
firms. Households in India (as elsewhere) are major contributors to the
nation’s savings. Based on the National Accounts series with 2004-05 as
base, the share of household savings in gross financial savings of the
nation as a whole fell from 72.7 per cent in 2004-05 to 60.9 per cent in
2007-08, then rose to 74.7 per cent in 2009-10 and stood in 2012-13 at
72.7 per cent (the same level recorded in 2004-05). Thus, though
volatile, the share of household savings in aggregate savings has mostly
remained in the 70 to 75 per cent range.
Not so robust
The
National Accounts statistics compute households’ savings as the sum
total of household financial savings and the savings of households in
physical assets. As direct capital formation estimates from the
household sector are not available, the value of household savings in
physical assets is computed as a residual, by deducting independently
estimated figures of capital formation in the public and private
corporate sectors from an estimate of capital formation for the economy
as a whole generated through a commodity flow approach.
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