 "Sriram Iyer")
It has been an eventful month for the global markets. With the US Federal Reserve’s tapering plans for bond-buying programme delayed, emerging markets breathed a sigh of relief.
Sriram Iyer, chief business officer, Religare Macquire Wealth Management (to be renamed Religare Private wealth management) talks to Ujjval Jauhari on the road ahead for the markets, his interpretation of the recent moves by the Reserve Bank of India (RBI) and the possible investment avenues for retail investors. Edited excerpts:
What are the key concerns of foreign investors when it comes to investing in India?
The concerns of foreign investors are twofold – the impending general elections and associated uncertainty/possible populist measures; and the twin deficits – fiscal and current (CAD). Foreign investors are also driven by their Emerging Market – India allocation and a lot of what they will do is a function of US Fed measures.
The surprise announcement by the fed in its recent FOMC meeting to hold back any cuts in its bond buying program has allayed short-term concerns of money being pulled out from the Indian markets.
What approach foreign investors are likely to adopt when it comes to investing in capital markets in India?
The foreign investors and non-resident Indians (NRIs) definitely have got impacted – at least from a sentimental perspective – because severity of losses they have suffered due to rupee depreciation.
So the investments or fresh allocation in the capital markets from them is going to take a long time.
Some of the larger Institutional investors, however, may decide to cut losses and square-off their positions, but NRIs tend to stay invested given their emotional connect albeit getting far more cautious and selective when allocating to the Indian markets.
What is the approach and advice for investment in equity funds?
There are Interesting ideas in equities as many stocks are near lows. Our idea on the ‘wellness’ portfolio theme has done well given almost 14% return.
From a fund perspective, there are a few funds that we are advising allocation in ideas that take advantage of volatility and dynamically manage allocations between cash/debt and equity.
We believe that such funds will offer an alpha in these volatile times. The core philosophy of Asset allocation and measure allocation in Equity through a staggered approach is something that will not change.
However Sentiment continues to be quite cautious. In terms of EPS (earnings per share) growth the things are not going to change overnight. Cost of capital remains high, inflations continue not to be very low.
Nevertheless, there are positive signs on CAD and the sentiments have improved quite a bit in last few days. RBI’s recent surprise hike in repo rate caught markets by surprise resulting in reversal of rally.
With the interest rates on a rise do you see debt funds being an ideal option?
Debt remains attractive and also fixed maturity plans (FMPs) are being looked at as interesting option. But I would suggest not locking investible money in these funds. Locking money for longer time will mean that you may have to forego other opportunities that may come your way in coming days.
There are number of open ended products where you can invest which may give you similar returns. So, one can opt for the liquidity option available even if the yields may be a few basis points lower.
What is your opinion towards Gilt funds?
Gilt funds as products are fundamentally risky in such volatile environments. Given that the long-term average of 10-year paper is in the region of 7.5%, there is a fair chance that investors will make capital gains over a 12-18 month period provided the deficit/inflation situation doesn’t deteriorate.
However, in the interim investors will need to stomach some serious volatility as evidenced in the last few weeks with yields swinging wildly and having an impact on clients exposed to funds with longer durations.
How about Gold funds?
In the long-term, how Gold prices will behave is dependent on multiple factors that cannot be predicted. Hence, I would recommend only some amount of allocation to Gold, say 5-8% of your overall allocation.
How should investors allocate their investments in current scenario?
Depending upon the risk appetite, investors can invest in ‘Protection’ assets where their capital will be always protected but liquidity will be low. They can invest in ‘Growth’ assets where there will be higher growth though the capital may not be protected. Also ‘Aspirational’ assets can be looked at from a long-term prospective.
How do you plan to proceed after Macquarie's planning to exit the joint venture?
Macquire had its own priorities and last year they had sold their Asia Private banking Business but in India they were continuing in the joint-venture. Now they decided to focus their efforts towards Australia.
This presented a fantastic opportunity to Religare who decided to take full ownership of the business thus endorsing the advisory led model that we have created in this business.
Wealth management business functions very well when it is able to leverage other capabilities that are available from the same group.
Our business is a part of the group which has NBFC’s, securities, insurance and the capital markets platform. This gives us access to all the capabilities than we can utilise to add significant value to our clients.
