Capital Boost

With real estate and fixed income falling out of favour, the rich are rejigging their asset allocation

A week is certainly a long time in politics and surely so in the stock market. Going by the Muhurat trading session that heralded Samvat 2074, one would feel uncertain about the times ahead given the low capacity utilisation and anemic credit growth. But with the government announcing the recapitalisation of PSU banks, it seems that the market now has a spring in its step with the benchmark indices at an all-time high.  

Even as the indices continue to vault, there appeared to be a sense of cautious optimism among the country’s leading private wealth advisors, who had gathered for the 6th edition of Outlook Business’ private wealth roundtable, Upper Crest. What came through during the discussion was that the country’s ultra rich are actively looking beyond real estate and fixed income. While real estate has failed to deliver for the past three to four years, a structural decline in interest rates is posing a challenge to those invested in debt. One wealth advisor pointed out that fixed income fetching a post-tax return of just about 4% is forcing investors into the equity market.

The TINA factor is in play and equity funds have turned out to be the flavour of the season, as the monthly flow of over Rs.20,000 crore into equity MFs testify. This growing liquidity is the reason for the market staying buoyant despite foreign institutional investors being net sellers in the past couple of months. Is the worst then in the price or are investors getting increasingly complacent?

Though the wealth advisors are looking at the probability of a 5-10% correction in the wake of worsening macro and a possible earnings downgrade, they still expect equity to deliver around 12-15% return over the next one year. Against this backdrop, this special annual edition tells you how the country’s affluent are deploying their wealth. This year was certainly eventful for investors and the next year promises to be even more so given that spoilsports pop up when you least expect them to.