Dalal Street Voice: We have seen interest in precious metals and real estate from HNIs in 2021, says Rahul Jain of Edelweiss Wealth Management

We have seen interest in precious metals and real estate from HNIs. Many HNIs are taking exposure to real estate through Real Estate Investment Trusts (REITs) and real estate-linked debentures, Rahul Jain, President and Head - Personal Wealth, Edelweiss Wealth Management said in an interview with Zeebiz’s Kshitij Anand.

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Rahul has over 17 years of professional experience in driving new business lines profitably and growing existing business lines in an efficient manner. Prior to working for Edelweiss, he was the head of the Retail broking division of ABN AMRO – India, and ICICI Bank looking after Products.

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Q) In the last year, India has created 30 unicorns; India's start-up space is the third most vibrant in the world. What led to the action and what are your views for 2022?

A) Most of the unicorns are tech-based platforms. India’s vast population and cheap labour make it ideal for tech platforms to set up and scale.

Also, India comprises of a young population that is willing to adopt such tech platforms as evidenced by the fact that we are at/near the top along with China in EY’s FinTech adoption index.

In the past, the major barrier for such tech platforms to come up and grow was the low internet penetration. Now that has changed with data becoming cheap and approaching China-like levels, which has led to high penetration even in the smaller cities and rural areas. This penetration is only set to grow, which bodes well for tech platforms.

Another contributing factor has been the liquidity conditions in the market which to some extent has led to rich valuation, although this is not specific to India.

In general, though, VC/PE funding activity is on the rise, which means that start-ups with potential are able to get the funding they need to grow, which they didn’t necessarily have in the past.

It should be noted that much of the unicorn value in India comes from the FinTech (particularly payments), e-commerce/delivery, and EdTech businesses. We are yet to gain traction in certain areas such as AI.

COVID has accelerated the digital push significantly. The growth that would normally occur in 4 years was achieved in just 1 year.

Also, India’s government initiatives in terms of payment systems might have been a major contributing factor. India’s payment systems are more advanced than a lot of developed economies.

Q) How has Wealth Management as a space evolved post the outbreak of the pandemic? What is the kind of trend/interest which got generated?

A) There has been a negligible impact of COVID-19 on the wealth management space. The long-term growth potential of the industry is very much intact.

Having said that, we have witnessed significant growth in business, thanks to the evolving maturity of investors who have a far greater risk appetite compared to the earlier generation.

The new breed of investors are willing to experiment and are open to considering alternative investment avenues.

This, of course, is backed by strong markets that scaled new peaks when the second wave of the pandemic was wreaking havoc.

Markets once again proved their resilience and rewarded those who remained committed to their investments.

Also, at Edelweiss, we have witnessed a robust growth of our business, with many investors collaborating with us in their wealth creation journey. I am confident that we will further strengthen our clientele going forward.

Q) Indian education system is the most prominent business leader leading global MNC’s. What are your views on this space, in fact, Byjus is also planning to make a D-St debut?

A) India has a huge talent and given the right opportunities and environment, they will shine anywhere in the world. While I am proud of the Indian talent leading these global opportunities, I also hope that as a country we will offer opportunities for the talent to stay back and create a global organization in India.

Byju is one such organization and is the leading EdTech Company in the world.

Byju in our view is doing two things really well - 1) It is democratizing high-quality education and making it accessible to large population who otherwise don't have access to high-quality content. 2) It is using India's low-cost advantage to serve the global education market.

Q) Apart from stocks, Fixed Income, what are the other avenues of creating wealth that HNIs are considering?

A) Of late, many new investment options have come to the fore for HNIs, beyond stocks and plain vanilla mutual funds.

We have seen interest in precious metals and real estate from HNIs. Many HNIs are taking exposure to real estate through Real Estate Investment Trusts (REITs) and real estate-linked debentures.

To provide stability to their portfolio, they are investing in precious metals such as gold via sovereign gold bonds and gold ETFs. However, majority of their investment is in fixed income and equities that have been the de-facto wealth creators for years.

Q) How do you sum up the wealth management industry for the year 2021 – key learnings, trends etc.?

A) 2021 has been relatively good for the wealth management industry, which saw several key trends. Digitalisation has to be the most prominent among them.

With the virus reducing mobility, our clients and we resorted to digital tools for communication and transaction. Our mobile trading app saw a huge jump in the number of users during this period. Going forward, digitalisation will further make deep inroads.

Also, there has been an increasing interest in equity investments, and the number of Demat accounts opened during the one and half years is a testament to this fact.

Also, we have observed clients showing interest in investing in different financial products apart from traditional ones. Their risk capacity has increased significantly.

However, I have always said that asset allocation is the key to success irrespective of the market situation. Following the tenets of asset allocation will hold investors in good stead across market cycles.

Q) What are your views on the recent SEBI framework for Algorithmic Trading?

A) It’s a step in the right direction as far as retail investors are concerned. It will protect the interest of retail investors and give them more confidence to go ahead with algo trading without fearing losses because of manipulation.

Also, it could be a blessing in disguise for brokers to scale up their technological prowess and expand their clientele.

Q) What is the kind of growth you foresee for the industry in 2022?

A) The year 2022 will be a very exciting year. We expect revenue to grow at 30% to USD70 Trn (NSE 500) in FY22. The economy is looking very vibrant and we are bullish on the economy.

The current corporate numbers being reported are showing improvement in demand, despite an increase in the Raw Material price. Decadal high EBITDA margins coupled with the highest ever conversion of Profits into operating cash flow would result in lighter B/S.

As most of the companies have substantially deleveraged their B/S over the last 2 years. Their B/S is in great shape. Assuming similar Cash flow from operations and Debt repayments, we expect INR 9 Trn free cash to generate.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)