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Thursday, Jul 04, 2002

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`Affluent clients averse to direct equity exposure'

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MUMBAI, July 3

INVESTORS, especially high net worth individuals (HNI), are not prepared to invest in equity unless they are assured of high risk-premium. They have also become much more responsive to market movements now than a couple of years ago, according to Mr Pallav Sinha, Chief Executive, JM Morgan Stanley Retail Services Private Ltd (JM Retail).

"Many people burnt their fingers in the market over the past couple of years. Now HNIs seek a return of about 14-15 per cent from direct equity investments," Mr Sinha said. JM Retail manages investments of about 1,200 HNI clients, whom it classifies as those who have investible surplus of Rs 15 lakh or more.

Prime Database ranked JM Morgan Retail number one among broking firms in terms of resource mobilisation from the public during 2001-02. According to Prime, the firm collected more than Rs 1,422 crore through 17 issues of equity, debt and hybrid instruments. Last year, it stood ninth in the list.

According to Mr Sinha, the uncertainties of the market have changed investor behaviour. "No one is clinging on to hope (of big returns) these days. The investor has learnt to be content with narrower margins. People like to book profits and reinvest now rather than hold stocks for long term," he said.

The caution has resulted in increased flow to mutual funds. "Mass-affluent" clients of JM Retail prefer putting money in mutual funds to taking direct equity exposures. "We have about 35,000 such clients. We consider investors with investible funds between Rs 1 lakh and Rs 15 lakh as mass-affluent. We expect this clientele to expand in the coming years," Mr Sinha said.

He said JM Retail's business model, which employs independent financial advisors has been the most effective with mass-affluent customers. "Many people who used to manage their investments themselves are now coming to us as they find their money is managed better than they could have," he said.

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