Wealthy investor accounts swell on market boom

Demat accounts with value of holdings in excess of Rs 10 lakh increase threefold since March 2013

The wealthy investor count has seen a sharp jump in the past three years because of the rally in the stocks and boom in initial public offerings (IPOs). The so-called high networth individuals (HNIs) count —those with value of their stock holdings in excess of Rs 10 lakh — have jumped three-fold to 124,978 at the end of March 2016 from 66,958 in March 2013, data provided by depository firm Central Depository Services show.

Although comparable data from the National Securities Depository is not available, market participants say the pattern is expected to be similar.

Despite the sharp increase, HNIs account for less than two per cent of the overall demat accounts in the country. These accounts now contribute 1.2 per cent of all the demat accounts against 0.5 per cent during FY13.

“Equity culture is increasing among HNIs. In the recent past, equity markets have given better returns compared to other asset classes. Further, the IPOs have also gathered momentum as some of them have given stellar returns so far. All these factors are bringing more HNIs into equities,” said B Gopkumar, chief executive officer, Reliance Money.

The trend is also evident from the recent IPOs wherein HNI books were oversubscribed 20-30 times even as other categories saw single digit oversubscription numbers. For instance, during the recent IPO of ICICI Prudential Life, HNI portion was oversubscribed close to 30 times while the institutional book was subscribed 11 times and the retail portion was subscribed barely 1.5 times. Even in case of Ratnakar Bank, the HNI portion was subscribed close to 200 times even as the retail book was subscribed just above five times and the total IPO was subscribed 70 times.

The outperformance of equities compared to other asset classes has also led to increase in the inflows into mutual funds. From 2013 lows, the benchmark indices are up nearly 60 per cent, while several broad-based indices including BSE Midcap and Smallcap have more than doubled. Because of the ongoing rally, several investors have seen the value of their stock holdings increase sustainably, moving them to the HNI bucket.

“The increase in HNI count is also due to upgradation. The recent bull market could have led to a significant increase in the portfolio value of various investors. For instance, Nifty is currently trading close to 40 per cent higher than its levels in 2014. Hence, the portfolio value of many accounts could have gone up more than even the Nifty,” said Prasanth Prabhakaran, president of retail broking at India Infoline.

During the year so far, the benchmark Nifty has gained a little less than 10 per cent and from the lows hit in February. The Nifty has rebounded 25 per cent. Many investors prefer taking stock market exposure through equities compared to direct investing, which has kept the overall HNI accounts count low.

During FY16, mutual funds received close to Rs 80,000 crore of net inflows into various equity schemes — the highest ever inflows received during a financial year, data from association of mutual funds in India showed. In the past two years, the sector saw eight million folios being added.