Got Rs 10 lakh to invest? Debt markets look attractive now, says Capital League’s Sapna Narang

Sapna Narang is the Managing Partner of Capital League, an independent boutique wealth management firm, which she founded in 2003. This is an all-women team that Narang and two other colleagues from HSBC, her ex-employer of almost four years, founded. They started Capital League, right after they left HSBC.

Narang’s speciality is advising high networth individuals (HNIs) and families on where to invest their money; an expertise that she developed and honed in her years of working in the private banking divisions of BNP Paribas, and Commerzbank.

The thought to shift from a salaried job with big private banks to opening her own firm came from the ideology of giving unbiased wealth management services.

“There is always a conflict of interest between product manufacturers and product sellers being under the same roof. So, from day one, we made a commitment that we will be independent, and we will offer unbiased advice,” she says.

In a career spanning almost three decades in the industry, Narang has seen many market cycles. In a conversation with Moneycontrol, she gives her view on how to invest Rs 10 lakh today. Edited excerpts:

It’s been two decades since you started Capital League, but you have been in the industry for longer. How have you seen the investment sentiment change over the decades?
There has been a sea change in the investment sentiment over time. India has grown manifold and the wealth being created in visible to all. More investors want to participate in the wealth-building opportunities, and rightly so. Many avenues and products are available for financialisation of assets.
It is easier to access such products pan-India through banks, NBFCs (non-banking financial companies), distributors, etc. SEBI regulations have ensured better product disclosures, ensuring that the right product reaches the appropriate customer, transparency, timelines for redemptions / switches, and so on.
Digitisation has brought about a larger degree of accessibility and safety through online credits/debits. There are strict checks on ‘KYC’ registration and capturing of investors’ contact details/nominations, etc. All of these have helped create investor trust in the system, and thus, build positive sentiment towards financial investing.

You talked about the changes in the economy leading to changes in investor sentiments. What do you think are some of the challenges faced by the Indian economy today, which can act as a threat to investors?
Inflation is the biggest issue today. Major economies like the US, Europe, Japan, etc are facing multi-decadal high inflation. This is leading to central banks increasing the interest rates at unprecedented speed. High interest rates lead to slowing down of economies. A slowing global economy affects India’s exports. High interest rates impact the flow of foreign funds in to India.
High interest rates in the US means stronger dollar, and thus, costlier imports for India.
The Russia-Ukraine war can create further issues in global oil prices. We import nearly 87 percent of our oil, and thus, are vulnerable to high oil prices.
The El Nino effect is expected to affect monsoon adversely. This can lead to poor agriculture (output), causing a negative impact on the rural economy and slowing down of growth of the economy as a whole.

Amidst such challenges domestically and globally, do you think it is the right time for a novice investor to enter the equity market or an existing investor to make a fresh investment?
Today, India is the 5th largest economy, and is projected to be the fastest growing large economy for the foreseeable future. Even amidst the existing challenges, you can see the increasing demand in the economy – full hotels, flight tickets, waiting time for cars, packed restaurants, housing demand, etc. It is imperative that we all participate in this multi-decadal wealth-creation opportunity.
To create wealth, you need to look at a longer time-frame. ‘Time in the market’ is more important than ‘timing’ the market. Ultimately, if your GDP is growing, your wealth will grow over the medium to longer term.Start with small SIPs and gradually build up as your comfort with the investing process increases. Interest rates are high. This is a good time to lock in small monies in long-term debt.

Can the increasing layoffs in industries in India have an impact on the investment sentiment of people?
We are reading reports of major tech layoffs ― Google, Twitter, Microsoft, start-ups, etc. So, it will definitely have an impact. When someone in the mid / high salary bracket loses job, it affects consumption in many sectors.
Having said that, we are seeing things like Air India placing the largest-ever airplane order (in the process) opening up over 20,000 positions across different verticals, hospitality sector facing shortage of people, etc. Housing demand is robust, creating many jobs in this sector. (There’s) huge investment in infrastructure. We are an expanding economy; so many new jobs are being created in various sectors.

Which sectors are you betting on this year?
For this year, I am betting on banking and financial services, consumer staples and automobiles to perform well.

Budget 2023 has made high-value insurance policies taxable, if the premiums paid in a year are in excess of Rs 5 lakh. Do you think this would slow down, if not stop, mis-selling?
The Budget has proposed to tax income/payouts from traditional insurance policies with (aggregate) premium in excess of Rs 5 lakh. This is applicable to policies issued after 1 April 2023. This is part of the government’s attempt to stop large tax savings by HNIs / Ultra HNIs through insurance policies.

What are your views about debt investments? We have almost reached the peak of interest rates. Should one focus on short-term, medium-term, or long-term funds at this point?
This is a very good time for long-term investors to lock in high yields.
It is beneficial to invest in medium- to longer-term products to lock in the high yields for a longer period of time. The 3-7-year bond segment is relatively more attractive. One can consider Target Maturity Funds (FMPs), corporate bond funds (with high credit rating), and medium-term funds.
The financial planning and asset allocation of a person depends on his/her financial goals and risk appetite.

But if I were to invest Rs 10 lakh in the market today, broadly what asset mix would you recommend me?
Assuming you are in your 40s and have a relatively balanced risk appetite, I would recommend you put 60 percent in debt and 40 percent in equity at this point in time. Equity should be done in a staggered manner. You can invest in a liquid fund and opt for a systematic transfer plan (STP) spread over 10 to 12 months.

What are the kinds of funds you would look at across debt and equity now?
In debt, we are looking at target maturity plans, corporate bonds and medium-term bonds with a 3-7-year timeline. And diversified funds, when it comes to equity.

Should a high-ticket investor look at AIFs and PMS as investment instruments, or are the funds recommended by you enough?
These instruments are not suitable for relatively smaller portfolios. The minimum investment required is Rs 1 crore and unless you have a Rs 15-crore plus portfolio, it doesn’t make sense to have your portfolio concentrated in one investment instrument. An AIF makes sense only if you are looking to invest in things like credit, real estate, or unlisted equities.

What is your one big investment mantra?
Always look at the long-term story. There is always something happening in the markets leading to volatility and every few years there is a big global event, block-out the noise and focus on the long-term fundamentals.