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Indian markets to attract more high-value investors through next few years

We have seen a significant rise in the number of HNIs and UHNIs in India over the last few years driven by factors such as a booming start-up ecosystem, an increasing number of unicorns and a rising share of the organised sector in the economy

January 09, 2022 / 07:12 AM IST
Representative Image

Representative Image

The start of a new year is the time to review the year gone by and draw up the blueprint for the year ahead.

A review of the year just passed shows that the equity markets continued the put up a strong show since April 2020 and throughout 2021. This was aided by the ultra-loose monetary policies of global central banks and abundant global liquidity.

The Nifty was up over 20 percent in 2021 and the rally was broadbased. The year 2021 will also be remembered for a host of new-age companies tapping the capital market with their public issues and drawing record subscriptions. Inflation has been benign for most part of 2021. Low interest rates in the economy and the low prevailing yields for high-quality debt funds made high net-worth individual (HNI) investors increase their investments in the direct debt and structured products which offer relatively attractive returns.

But the run-up in equities through the last 20-odd months has left little valuation comfort. Investors will need to be a lot more circumspect with respect to where to invest going forward. They should stick to their asset allocation and also moderate return expectations from equities in 2022. One needs to consider the nature of the business, quality of management and valuation while deciding which company to invest into. Investing a portion of the portfolio in international equities from a diversification perspective is also recommended.

Given the prospect of a further pick-up in inflation and recovery gathering momentum, there are chances that the RBI and global central banks may raise interest rates from early 2022.

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Liquidity may also be reined in by the central banks. Due attention will need to be given to fixed income investment avenues so that there is a minimal mark-to-market impact on the portfolio while earning a reasonable yield. Products such as Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (InvIT) are likely to attract higher investor interest in such an environment. Both REITs and InvITs provide regular income in the form of dividend, interest payments and/or return of capital (amortization of debt).

Investments in long or short funds which follow an absolute return strategy and seek to provide capital appreciation with low volatility may also see increasing participation.

From a wealth management industry perspective, we have seen a significant rise in the number of HNIs and UHNIs (ultra-high net-worth individuals) in India over the last few years driven by factors such as a booming start-up ecosystem, an increasing number of unicorns and a rising share of organised sector in the economy. We expect this trend to continue for the next several years. We also believe that digitisation will ensure the ease of access to information and financial products which, in turn, will broaden the investor base and allow HNIs based in Tier II and Tier III locations to access capital markets.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sameer Kaul is the CEO & MD at TrustPlutus Wealth (India) Pvt Ltd.
first published: Jan 9, 2022 07:12 am

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