Where The Rich Are Investing

Big money talk

Insights into the investment preferences of the affluent

It’s well known that most Indian savers prefer physical assets over financial assets. And actually, in the current times, their default choice is proving to be the best choice they could have made. Astute stock-picking aside, not equity…public or private, not exotic structured products, not even commodities, have delivered return worth salivating over the past five years. Given the low risk appetite, fixed income was a natural safe harbour, but there too investor confidence has been hit after the unexpected hike in the repo rate. 

It’s only real estate and gold that delivered somewhat respectable return during the period, and especially over the past one year. As it turns out, the return from gold camouflages the fact that international prices have actually been correcting and the higher rupee return was driven by a weakening currency. That leaves real estate as the winner. Despite the crisis of confidence in realtors, and demand remaining stagnant, real estate continues to hold sway. And for most high networth families, it is this asset class that constitutes the biggest investment, after their own businesses. This comes across clearly in this year’s private wealth special edition.

The multi-million square-foot question then is, can this trend sustain? More importantly, can real estate prices continue to rise when most realtors are cash-strapped and have so far doggedly refused to unload inventory. While the smart money is sitting tight, their advisors are urging caution and are making a case for equities. Their logic being: valuation is attractive and any revival in economic growth will be first reflected in the stock market.

But with sentiment being weak and the general elections next year, there is no consensus on when and which way things could turn. So, the smart money may bide time and seize opportunities as they arise. Our prayer on this Lakshmi Pooja is that she not only gives us those opportunities soon but also the mental fortitude to grab them. Wish you all a very prosperous and peaceful Diwali.