Household savings routed via securities market jump to Rs 6.91 lakh crore in FY25

Indian households' savings routed through the securities market rose to Rs 6.91 lakh crore in 2024-25, increasing the country's gross savings-to-GDP ratio by 47 basis points.

Financial assets are increasingly gaining favour among Indian households, with savings routed through the securities market rising to Rs 6.91 lakh crore in 2024-25 from Rs 3.58 lakh crore in the preceding fiscal, according to a research paper authored by Sebi officials.

The paper said the revised estimate is significantly higher than the Rs 5.43 lakh crore that would have been recorded under the earlier methodology for FY25.

As a result, India's gross savings-to-GDP ratio for 2024-25 increased by 47 basis points to 34.94 per cent compared to 34.47 per cent under the previous methodology.

The paper, authored by Prabhas Kumar Rath, Shyni Sunil and Kalyani H, said household savings channelled through the securities market form a crucial component of financial savings and are emerging as an attractive alternative to traditional assets, such as gold and real estate.

While physical assets like gold and real estate have conventionally been preferred, financial assets are gaining popularity due to their potential for higher returns and liquidity, the authors said in the research paper uploaded on Sebi's website on Wednesday.

They added that government initiatives, such as tax incentives on investments, financial inclusion programmes and digital banking, have also encouraged Indian households to shift towards financial assets.

Sebi clarified that the findings and views expressed in the paper are those of the authors and do not necessarily reflect the regulator's official position.

The study examines the macroeconomic impact of a methodological shift in the computation of household savings through the Indian securities market undertaken by Sebi in consultation with the Reserve Bank of India (RBI) and the Ministry of Statistics and Programme Implementation (MoSPI).

The revised methodology has been incorporated into the national accounts series based on the new 2022-23 base year.

Earlier, the RBI and MoSPI relied largely on estimates to compute household savings through the securities market. Under the old framework, 35 per cent of public and rights issues in equities, 40 per cent of public issues of corporate debt, and actual investments in mutual funds were treated as household savings.

However, this approach excluded investments in preferential allotments, private placements of debt, secondary market transactions, and new-age instruments, such as REITs, InvITs and Alternative Investment Funds (AIFs).

The new methodology uses actual granular data from depositories, stock exchanges and the Association of Mutual Funds in India (AMFI) to capture household investments across a broader range of instruments and market segments.

It also includes Non-Profit Institutions Serving Households (NPISHs), such as trusts, societies and charitable organisations, in addition to individual investors.

According to the research paper, household savings through the securities market rose from Rs 2.60 lakh crore in 2022-23 to Rs 3.58 lakh crore in 2023-24 and further to Rs 6.91 lakh crore in 2024-25.

Primary market investments accounted for Rs 6.32 lakh crore in 2024-25, led by mutual funds at Rs 5.13 lakh crore and equity issuances at Rs 95,139 crore.

Secondary market investments contributed Rs 59,452 crore during the year, supported by net investments in debt securities, exchange-traded funds, REITs and InvITs.

The paper noted that household savings through the securities market amounted to 2.17 per cent of GDP in 2024-25 compared to 1.71 per cent under the earlier methodology.

Similarly, the household savings-to-GDP ratio improved to 21.7 per cent from 21.23 per cent, while net household financial savings rose to 7.10 per cent of GDP from 6.63 per cent.

Jimeet Modi, founder and CEO of SAMCO Group, said the most notable takeaway was that households were net sellers of direct equity worth Rs 54,786 crore in FY25, following net sales of Rs 69,329 crore in the previous year, even as they made record investments in mutual funds.

''This is not a retreat. This is maturation,'' he said, adding that retail investors are increasingly booking gains in direct equities while allocating fresh savings to professionally managed vehicles.

Modi said mutual funds have become the primary channel for household financial savings, with nearly four-fifths of the Rs 6.91 lakh crore invested in securities markets in FY25 flowing through mutual funds.

The paper further estimated that the total stock of household assets held in Indian securities markets -- including equities, mutual funds, debt securities, REITs, InvITs and AIFs -- stood at Rs 141.34 lakh crore at the end of 2024-25.

Of this, equity holdings accounted for Rs 88.92 lakh crore, mutual fund investments for Rs 44.39 lakh crore and AIF investments for Rs 1.55 lakh crore.