Indian investors’ love towards capital market is well known. Not from today, but from 1875, when Asia’s first stock exchange the Bombay Stock Exchange (BSE) was established in the financial capital of the country, which is now known as Mumbai. This fact was once again established in the recent report titled ‘The Wealth Report’, released by Knight Frank, a leading global independent property consultancy.
Not only this, based on their investment acumen, Indians are expected to create a bigger fortune in the current calendar year 2019. This can be seen from yet another finding of the report that says India has led the global growth of Ultra High Net Worth Individuals (UHNWIs) with a growth of 116 per cent in billionaire population between 2013 and 2018. As per the Wealth Report, the High Net Worth Individual (HNWI) is classified as someone with a net worth of over US $1 million (approximately Rs7 crore) excluding their primary residence, while UHNWI is someone with a net worth of over US$ 30 million (approximately Rs 210 crore), excluding their primary residence.
According to the Attitudes Survey, launched in March within the Knight Frank Wealth Report, is based on responses provided by 600 private bankers and wealth advisers who between them manage over US $3 trillion of wealth for their UHNWI clients.
For 2018, Indian respondents to the attitude survey launched along with the wealth report gave thumbs up to equities (30 per cent) and bonds (28 per cent) where respondents to the survey said that their clients preferred these high return investment assets. Real estate with 23 per cent was the third most invested asset class by India’s UHNWIs. Interestingly, liquidity was not the preferred asset, which made up only nine per cent of the total investments of Indian ultra-rich.
In the Indian market, there is a strong bend towards equities (34 per cent) and private equities (37 per cent). Private equity, which saw only about four per cent of wealth allocation in 2018, is set to see a significant rise in 2019. Bucking the global trend, Indian UHNWI showed least preference for the most liquid of all assets, that is cash, which registered a negative sentiment of -15 per cent. A strong trend was also witnessed in bonds investment for which sentiments saw a rise of 20 per cent.
Shishir Baijal, Chairman and MD, Knight Frank India, said, “While globally UHNWIs are showing affinity towards more liquid investments, as it is the most risk averse asset, Indian counterparts, on the other hand, are increasing their exposure in equity and bonds. There is a sense of confidence amongst Indian UHNWIs on the strength of the country’s economic growth, which is pushing them to invest in higher risk assets for shorter periods. Real estate (zero per cent) and luxury investments (five per cent), which are the most illiquid asset amongst them, remain largely stable.”
Asia emerging as a stronger region in the world order is expected to gather further momentum in the next five years. Asia’s billionaire population growth is set to outpace other regions of the world between 2018 and 2023, according to data prepared exclusively for the 13th edition of The Wealth Report. The number of billionaires from the region will rise by 27 per cent, surpassing growth in North America (17 per cent) and Europe (18 per cent), reaching 1,003 in the next four years – more than a third of the world’s total billionaire population of 2,696.
However, this growth is at a slower pace compared with the last period measured from 2013 to 2018 when the number of billionaires in the region more than doubled from 363 to 787. India saw a rise of 116 per cent in billionaire population between 2013 – 18 while the expected growth of 37 per cent for the next five years (2018 – 23) beats the global and the regional average.
Echoing the trend seen in previous editions of the report, Asian countries will also see the fastest growth in UHNWIs, defined as those with net assets of US$30 million or more, in the period between 2018 and 2023. Of the 59 countries and territories in Knight Frank’s forecasts, eight of the top ten countries by future growth are in Asia, with Ukraine and Romania taking the remaining spots.
India leads with 39 per cent growth, followed by the Philippines (38 per cent) and China (35 per cent). Despite the election uncertainties of 2019, India’s wealth is expected to charge ahead over the next five years with the number of UHNWIs rising to 2,697. Starting from a low base, the Philippines is projected to have 296 UHNWIs by 2023, less than two per cent of the projected ultra-wealthy population of Japan, the most prominent Asian wealth hub.
Amongst the Indian cities, Bengaluru is expected to lead the UHNWI growth in India. As per the report, the city will see a growth of 40 per cent in UHNWI population making it the first among the top five future cities in the world. The heartening aspect of this growth is that, it is expected to come out of growth in professional services and innovations indicative of strong economic fundamentals of the city.
Nicholas Holt, Head of Research, Knight Frank Asia Pacific, said, “Despite softening momentum in the region’s economies, growth prospects in Asia remain favourable in the medium term. While China’s economy is expected to slowdown, emerging markets such as India and the Philippines will deliver some of the strongest growth over the coming years.”
Baijal said, “63 per cent of the world’s ultra HNWIs saw an exponential surge in their wealth in 2018, clearly showcasing the economic optimism around the globe. Despite a slide in the Indian rupee against the US Dollar, India witnessed a growth in UHNWIs due to heightened economic activity and strong performance of equity markets. Not surprisingly, the growth has been observed in gateway markets of Mumbai and Delhi by 38 per cent. However, Bengaluru is first amongst the top five eye-catching ‘cities of the future’ based on their future economic potential predicted to witness 40 per cent growth of UHNWIs over the next five years. Indians will continue to remain optimistic in their wealth creation in 2019 as well.”
Indian investors to increase their equity exposure in 2019
Indian investors’ exposure to equity has remained highest among all the other asset classes. On an average, Indian investor has allotted 30 per cent of its investment portfolio to the equity followed by 28 per cent of its assets invested in safer instruments of the capital markets that is bonds (fixed income securities). The global average for such investments is 20 per cent. This was revealed in Attitude Survey, a part of the wealth report.
According to the survey, Indian investors’ equity and bond market exposure is going to witness a significant jump from their 2018 level. According to wealth managers, who participated in the survey, said they see their 60 per cent Indian clients increasing their equity exposure in 2019, while 26 per cent of their clients are expected to decrease their equity exposure in 2019. About 26 per cent will maintain their level of investment in equity and only three per cent will stay away from this asset class.
In 2019, around 46 per cent Indian clients of wealth advisors (against the global average of 42 per cent and 30 per cent of Asian average) will invest in bond market, while only 26 per cent of clients will reduce their exposure in bond market which is almost equivalent to 25 per cent of global average and Asian average of 29 per cent.