This article is more than 2 years old.

June 23, 2017 This article is more than 2 years old.

Of late, foreign investors have shown far more confidence in the Indian economy than Indians themselves have.

Foreign portfolio investors (FPIs) now own over 50% of the shares of India’s top seven banks and financial institutions. Some 25% of the shareholding in companies that make up the BSE 200 index is now owned by FPIs, a June 21 report by Kotak Institutional Equities says. ”(The value of) FPI investment (in BSE 200) has increased to $368 billion as of March 31, 2017, from $132 billion as of March 31, 2007,” it notes.

This is an indication “that foreigners have more faith in India’s economy than Indians,” the Kotak report says.

Investors in the West, particularly, are betting on the growth and reforms narrative created by prime minister Narendra Modi since he came to power in 2014. ”India stands very high, along with China, and will probably move higher because of the reforms. They are the biggest areas where we are investing right now,” Mark Mobius, executive chairman of investment firm Templeton Emerging Markets Group, told the Mint newspaper in May 2017.

Meanwhile, Indians have been cautious.

While FPI inflows stood at $124 billion between 2008 and 2017, gold consumption in India stood at $300 billion, the report said. “Large gold imports reflect low confidence historically among Indians in government policies,” it added.

India has traditionally been a hoarder of the yellow metal, which has a lot of cultural significance in the country. Gold is also a favoured instrument to park unaccounted money.

However, even rising prices haven’t stopped people from buying gold. On the other hand, equity investors are few. Only two states, Maharashtra and Gujarat, have over 5% of their population registered as stock market investors, an analysis of BSE data by the Mint newspaper found in February 2017.

The penetration of mutual funds (MF), which typically invest in equities, is another proof of this wariness. MFs’ assets under management in India account for just 12% of the country’s GDP, compared to the global average of 55%.

But things are changing. Since the second-half of 2016, domestic institutional investors (DIIs), including MFs and insurance firms, have been buying more equities than they used to earlier.

“Domestic investors have been building strong positions in equities for the last many months and we are continuing to see strong inflows from domestic investors as they believe strongly in India’s growth story,” Sunil Singhania, head of equities at Reliance Capital Asset Management, an MF, told the Economic Times in April 2017.

But as of now, gold shines brighter for Indians.