‘Dollar-denominated bonds attracting higher investments’

By Ashley Coutinho

Wealthy investors are optimistic about India’s growth story and believe there is room to increase allocation to equities, says Ashish Kehair, managing director and chief executive officer of Edelweiss Wealth Management. In an interview with Ashley Coutinho, he says that small and mid-caps will do better in the coming quarters as they have more exposure to the national growth story than large-caps. Extracts.

Has risk sentiment returned among wealthy investors?

Wealthy investors are optimistic about India’s growth story and believe there is room to increase allocation to equities. The demand scenario in India is quite resilient. In the June quarter, revenue growth was encouraging, especially when considering the slowdown in China and similar trends in the US and Europe. We are on stronger ground when it comes to fundamentals. Foreign investor outflows have moderated. All of these factors make a compelling case for staying invested in stocks.

What’s your take on small- and mid-cap stocks right now?

In 2022 to date, small and mid caps have been trading in line with large caps. But I do think that small- and mid-caps will do better in the coming quarters, as they have more exposure to the national growth story than large-caps. In addition, the benefits of operating leverage in mid-cap companies are much higher than in large-cap companies.

Are there buyers of credit risk funds at the moment?

Credit risk funds are not seeing significant investments. The assets under management (AUM) of these funds have remained stagnant at around `26,000 crore, which is similar to the AUM a year ago. Retail investors have reduced exposure to this category. HNIs are investing in these funds through alternative investment funds. It can be seen that direct emissions have also started to gain ground. As credit spreads become more favourable, investors will increase allocation to selected issuers.

Also read: NTPC curbs coal imports as stocks improve

What are your views on gold as an asset class?

Gold prices touched almost $2,100 in March before falling to the current level of around $1,700. With the rupee depreciating against the US dollar by around 7% since February, the value of Indian gold investments in rupee terms has not changed significantly. To some extent, it can also be attributed to the increase in customs duties on gold to the tune of 5% in June. Russia’s central bank has the fifth largest gold reserve in the world at about $140 billion. If they sell their gold reserves to manage the ruble, gold prices could fall further. We believe central banks’ focus may soon shift to growth. Currently, we are not overweight gold.

What is your opinion on international investment?

International markets have attracted the attention of investors. The number of international funds available to invest in offshore assets has also increased. Even remittances abroad under the Liberalized Remittances Scheme have increased. In foreign markets, real estate investments have been largely focused on large cities. Dollar-denominated bonds have attracted higher investment as they offer 100-120 basis points higher yields compared to rupee-denominated bonds.

What role does technology play in wealth management?

Investors are turning away from traditional savings avenues towards more tax-efficient capital market instruments. In recent years, there has been considerable progress in the scope and convenience of transactions in products such as mutual funds, PMS, IDAs, bonds, and insurance products. With the advent of technology across India stack and the proliferation of smartphones, customers in remote areas can now seamlessly access and transact. This is benefiting both manufacturing (asset management) and distribution (wealth management) players in general. In addition, specialized products are being created that give clients access to asset classes and risk-return profiles that were previously unavailable or available to an exclusive club of investors.

What are your plans for Edelweiss Wealth Management in the coming months?

We will focus on key elements such as spin-off, listing, building structural efficiencies and improving our credit rating profile. We are working on the spin-off and believe that regulatory and other approvals will be completed in a timely manner. So, we’ll think about listing. Since we are separating from a publicly traded company, we will be listing without an IPO.

What do you think of new age wealth management companies?

We deal with ultra-HNI and institutional clients and provide them with wealth management, investment banking, institutional equities and asset management services. On the other hand, the new age players cater to medium and retail customers. They offer access to a single product using technology-based platforms. They have yet to discover a profitable business model. Only a few have been able to do so.

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