Consumer practices have changed as a result of Corporate India's diversified financial market
While there has been an uneven impact of the pandemic on different sections of society leading to differed consumer profiles, many positive trends have emerged in both consumption and investment patterns post-pandemic. Consumer behaviour has seen a large transformation encouraged by Corporate India embracing the Work from Home (WFH) culture and this coupled with the large importance given to personal and family health has facilitated a rise in discretionary spending amongst Indian consumers. Additionally, with WFH and lockdowns providing people with more time to track their investments, there has been a steady increase in investors trading on their own and exploring alternative asset classes.
Sectors that have benefitted from this paradigm shift in consumer behaviour have been pharma, telecom, Fast Moving Consumer Goods, power sector, organised retail, automobiles, banking, financial services and insurance among others; and this has positively impacted Indian indices which have recorded handsome gains from the March 2020 lows. This broad-based equity rally has driven more participation by retail investors who were drawn in by attractive stock valuations post the market sell-off. Foreign Portfolio Investors (FPIs) have ploughed Rs 2,74,034 crores into the Indian stock markets over the previous financial year, which in tandem with mutual fund inflows of Rs 96,000 crore have helped Nifty and Sensex to trade significantly above their pre-pandemic levels and near all-time highs today. In fact, the March 2021 SIP mutual fund in-flow of Rs 9,182 crores is the highest over the preceding 12 months and is indicative of the drop in income uncertainty and renewed investor optimism.
Equities aside, more Indians are diversifying their portfolio to include investments in realty, debt, insurance products, and gold due to a multitude of factors. Investments in the realty sector have been influenced by a combination of depressed prices in major markets, tax benefits offered by various state governments, and the follow-on effect of WFH culture which has necessitated private spaces for both working members of a traditional nuclear family. With housing loans now accessible at rates as low as 6.75 per cent and some state governments going soft of the stamp duty for registrations, many first-time homebuyers are rushing to finalise on their dream homes as indicated by the surge in house sales in fourth quarter of fiscal year 2020-21.
Traditionally, India has always been a leading consumer of physical gold due to the cultural and social status attributed to the yellow metal. However, post- pandemic, Indian consumers are exploring alternate options like investing in gold exchange traded fund, gold mutual funds, and sovereign gold bonds (SGBs) to take advantage of the relative stability in prices and the long-term return potential that gold has to offer. Other products include buying gold futures on leading commodity exchanges and investing in Gold Accumulation Plans (GAP) whereby gold is purchased digitally and can be redeemed in physical form on maturity or sold to the vendor. The first three months of 2021 have seen resurgence in the demand for gold on account of softening gold prices, a sharp uptick in economic activity, and more investment products being available for the public at large.
Surveys also allude to the fact that more than 70 per cent of Indians are now placing greater emphasis on increasing allocation to debt and insurance instruments with a view on securing themselves in the event of another pandemic or calamity in the future. This has led to an increase in capital being allocated to traditional instruments like fixed deposits and Public Provident Fund (PPF) while savvy investors are actively investing in mutual fund debt schemes owing to the higher return potential compared to an FD or PPF. The general and life insurance sector has been one of the largest benefactors in the post- pandemic era due to increased consumer awareness of the importance of insurance and in addition to traditional life and medical insurance products, consumers are lapping up home insurance products too to secure their realty investments. Both life and general insurance companies seem poised to benefit from this trend and will see a significant improvement in their insured base going ahead.
Moreover, as laid out in the 2021 Union Budget, the limit on foreign investments in Indian insurance companies has been increased from 49 per cent to 74 per cent thereby enabling foreign insurance firms to bring in international best practices, technology, processes, and long-term resources that will aid in making insurance more accessible to the masses.
Despite the crippling effect of the first nationwide lockdown in March 2020, the Indian economy has bounced back stronger than ever with most of the high-frequency lead indicators of consumption and investment demand continuing to strengthen through the third quarter of fiscal year 2020-21. The low-interest environment is a further catalyst to both private consumption and investment and has been instrumental in driving more Indians to invest their surplus capital in a range of financial products and asset classes. For local and global investors, India offers a promising structural growth story for the next couple of decades and has a diversified representation of attractive and high-return sectors like technology, healthcare, consumption, and banking on its indices. If inflationary pressures are contained and the low-interest rate regime continues, the long-term prospects for the Indian economy remain bullish and investors would do well to remain invested across the various financial markets available for investment today.
The author is CEO, Taurus Mutual Fund
DISCLAIMER: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.