Family Offices Seeing Market Dips as Buying Windows, Says Equirus' Ajay Garg

While investors remain cautious amid a broader market bloodbath on D-Street, family offices continue to hold their confidence. For them, the recent correction does not derail the domestic equity market’s long-term momentum, which has delivered solid returns in recent years.

Speaking to Outlook Business, Ajay Garg, founder and managing director of Equirus, pointed out that foreign investors still hold 16-18% of Indian equities, indicating sustained confidence despite the correction. While this is down from the peak of 20% during FY14-20, India has seen net FII inflows in seven of the last ten years, which is more than any other emerging market, according to BNP Paribas Exane.

"Over the last three years, US equities have clearly delivered higher returns. But if you look at the last 25 years, Indian equities have outperformed. What’s important to consider is that India is still a smaller market but growing much faster. We’re talking about GDP growth that’s higher than that of the US. And public market valuations are always forward-looking, investors are constantly assessing the outlook for the next 12 to 24 months," Garg said.

The Nifty50 index is currently trading at a forward PE of 18.6x, which is 9% below its long-term average, according to Motilal Oswal. Over the past six months, the broader market has dropped over 15% from its 52-week high. And, while some are expecting more pain ahead, many are seeing the current market correction as a healthy reset with overheated valuations finally cooling off.

"The market was doing very well last year, but given the overall outlook, a correction was long overdue. Many investors, including family offices, told us they were waiting for a dip to invest. Equity markets are never a straight line, so in that context, this correction was expected," Garg said.

He also added that the current macro environment is much stronger than it was a year ago. With general elections in major economies behind us and the rate-cut cycle underway, macro fundamentals are now well-positioned.

This might not be reflected in stock prices or market sentiment just yet, but that’s because markets and economic data don’t always align perfectly. In the equity segment, HNIs and family offices are now increasingly inclining towards Portfolio management services (PMS) and Alternative investment funds (AIFs). There has also been a noticeable growth in venture investing and unlisted equities.

As per Sebi's annual report, around 1,283 AIFs were registered with the capital market regulator as of March 31, 2024, marking a surge from 1,088 recorded at the end of March 2023. Nearly half of these registrations occurred in the past three years, with 195 added in FY24, 235 in FY23 and 157 in FY22.

SEBI data also indicated that investor commitments to these AIFs jumped by about 36% year-on-year, reaching Rs 11.35 trillion from Rs 8.33 trillion.

(The opinions and recommendations expressed in the article are those of individual analysts and brokerage firms. Investors should consult certified market experts before making decisions.)