Financial Daily from THE HINDU group of publications
Tuesday, May 30, 2006
Financial Daily from THE HINDU group of publications Tuesday, May 30, 2006 |
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Money & Banking
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Trends Markets - Stock Markets Our Bureau
Different strokes Kotak Mahindra Bank advice to clients was to invest across various asset classes and maintain discipline HSBC advised its clients to book profits on a systematic basis. ICICI Bank advised its clients to reinvest when the Sensex crashed from 12,000 to 9,000
Mumbai , May 29 The recent crash in the stock market has not shaken the confidence of high net worth individuals (HNIs), according to bankers managing the funds for these preferred clients. Though their clients may have seen a slight diminishing of their wealth, it is unlikely that they suffered losses, bank officials said. Typically, this segment has a higher exposure to equities as against smaller depositors, due to the larger amounts of surplus cash available with them. While some banks advised their HNI clients to use the opportunity to book profits, others advised clients to use the slump as an opportunity to buy value stocks. According to Mr C. Jayaram, Executive Director, Head-Wealth Management, Kotak Mahindra Bank, the bank's advice to clients was to invest across various asset classes and maintain discipline. Unfortunately, investors in India are faced with limited asset classes such as equity, fixed income, real estate, and commodity to some extent. Therefore, by default, equities form a significant part of the HNIs' investment portfolio, Mr Jayaram said. "In the last 1-2 years, the proportion of our HNI clients who have increased their exposure to equity has gone up. The stock market has gone up so much that people did not feel the need to get out of equities during the crash." However, he said, if the stock markets continue to be in decline mode, then clients might want to change their asset classes. Kotak Mahindra has about 3,600 HNI clients with a cut-off over Rs 5 crore investible assets. HSBC, which manages about 1,000 clients with assets under management of about Rs 2,500 crore, advised its clients to book profits on a systematic basis. "In the falling market, we advised clients to take profit on a systematic basis and not to exit completely. Because, then, they may miss out on the upside," said Mr Subir Mittra, Head, Private Banking, India, HSBC. In an extreme volatile market, it is also important to pick the right stock and buy good stocks on dips, he added. Most banks offer extensive research reports and technical advice about individual companies to help their clients make the right choice regarding stocks. ICICI Bank advised its clients to reinvest when the Sensex crashed from 12,000 to 9,000, said Mr Anup Bagchi, General Manager. "Clients who followed this strategy have overall made higher returns." Another reason that many HNIs chose to stay invested during the fall is many of the HNI clients are SME entrepreneurs, who are more comfortable with risk. "HNIs prefer high risk and high reward. Therefore, most of them have not moved away from equities as an asset class as the fundamentals are good," Mr Bagchi said.
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