High-net optimism

Diwali is not only a festival of lights but also of sound. And amid all the noise and fumes also lies hope of a fresh beginning as it heralds the start of Vikram Samvat 2072. Traditionally, much of the broking community originated from Gujarat and, hence, the Samvat calendar still has its prominence. For us, the onset of Diwali is an opportune time to ask India’s premier private wealth advisors what they are advising their clients. We did so this year, too, and to know what transpired, turn to page 63.

Two factors stood out at this year’s private wealth roundtable. One was the openness of high-networth individuals to increasingly look beyond real estate and the buoyancy of domestic money pouring into mutual funds. Real estate and gold have been two asset classes historically favoured for their tangibility and the ease of deploying undisclosed income. While the appetite for gold is hard to suppress, especially for womenfolk, there is a rethink about deploying more into real estate.

The disinterest in real estate stems from currently elevated prices that has put a question mark on demand and, therefore, further appreciation. Like the late auto components tycoon, Surinder Kapur, pointed out in our last year’s edition of Where the rich are investing, “For $1 million, you can get something fantastic in Munich but nothing in South Mumbai for the same money.” Nothing much has changed since last year with respect to either price or demand. 

As for interest in equities, retail money has tended to be fickle and thus far has a history of entering and exiting at the wrong time. The highest retail flow in 2015 stood at Rs.12,273 crore in June when the Sensex was around 28,000 and the first six months of FY16 has seen an addition of over 2 million folios. For FY16, the Sensex is down 7.5% but retail money has thus far been patient. For this year though, advisors are predicting herding in equities on the expectation of an economic recovery in FY17.  Meanwhile, the rich folks are also herding to fund start-ups. Being in vogue, it surely makes for good cocktail conversation and given some of the valuations, it does make for interesting chatter.