In 2004-05, just Rs 7,787 crore (Rs 77.87 billion) worth of financial assets of the household sector flowed into shares and debentures, which is just 2.03 per cent of the total household savings in 2004-05.
The startling figures have been revealed in the Reserve Bank of India's Handbook of Statistics on The Indian Economy, 2004-05, released last week.
This is, however, only a preliminary estimate by the banking regulator. Household investment in shares and debentures was slightly higher at Rs 9,076 crore (Rs 90.76 billion) in 2003-04.
The ambit of investment includes exposure to debentures floated by credit and non-credit societies, public sector bonds and mutual funds.
Senior bankers say the proportion of debentures will be more than equities. The other sources of domestic funds flow in the equity market are banks and the insurance sector.
Banks are allowed to invest up to 5 per cent of their incremental net time and demand liabilities in the stock market. However, except for a few private sector banks, Indian banks are averse to the idea of investing money in the stock market.
Insurance players are allowed to invest up to 35 per cent of the incremental premiums in market securities, which includes bonds, debentures and equity.
Overseas investors which have a strong grip on the Indian stock market had pumped in a net Rs 39,590 crore (Rs 395.90 billion) in 2004-05, lower than the Rs 43,431.4 crore (Rs 434.31 billion) in the previous year.
The mutual funds, which are a crucial investment vehicle for middle-class households, infused a net Rs 2,185 crore (Rs 21.85 billion) in 2004-05 in the equity market as against Rs 1,548.6 crore (Rs 15.48 billion) in 2003-04.
The households sector's strong preference for a secure avenue is borne out by huge flow of investments in bank deposits. They invested Rs 1,66,660 crore (Rs 1666.6 billion) in 2004-05 compared to Rs 1,57,300 crore (Rs 1573 billion) in 2003-04.
The next most preferred avenue for investments for household investors is small saving. They put Rs 1,02,514 crore (Rs 1025.14 billion) in 2004-05, substantially higher than the Rs 78,083 crore (Rs 780.83 billion) in the previous fiscal.
The contributions to provident fund and pensions rose to Rs 56,130 crore (Rs 561.3 billion) in 2004-05 from Rs 52,150 crore (Rs 521.5 billion) in 2003-04. The attraction of non-banking deposits was on the wane as seen from the dip in inflows.
The accretion showed a sharp drop to Rs 1,78 crore (Rs 1.78 billion) in the current financial year from the Rs 3,434 crore (Rs 34.34 billion) in the previous financial year.
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