The Hindu Business Line : Caution the watchword

“There is more to east than what meets the eye”, declares Mr Ambrish Agarwal, Director, Eastern Financiers Ltd, quite fervently when Business Line sought his views on a much-discussed notion – the changing preferences of investors based in Kolkata and elsewhere in the eastern region. “For one thing, some of our more discerning clients are taking to alternative investments more seriously”, he said while referring to some of the trends that are lately becoming evident. Excerpts from the interview:

The index has scaled up to 17,000 points and beyond. Should investors take profits, at least partially? Or should they wait for further upside?

Ah, this is one of those classical questions that can be asked at almost every juncture. The index has truly crossed a lot of milestones. And every time it has breached a key level, investors have asked themselves whether the next level will be reached any time soon. The point is, a good number of them have gained handsomely from the advancing market, thanks to the kind of wealth that rising stocks have generated.

It is now entirely up to them to consider a withdrawal, wholly or otherwise. What I want to state is simple – pull out, at least partially, if your targets have been achieved, assuming that your asset allocation strategy justifies such a move. If an investor is satisfied on this count, profit-taking will be definitely warranted. The decision needs to be a function of the investor’s appetite for risk.

Now, what may appear to you as risky may be perfectly within the margin of safety insofar as someone else is concerned. Waiting for a fresh upside, the next milestone, is again a decision for an individual participant.

Is there scope now for more investment in fixed-income, especially when equities have moved so far ahead?

This, in a manner of speaking, is an asset allocation call. If an investor has actually developed an equity overhang at this juncture, fixed-income remains an option he or she can explore actively. The domain of fixed-income products is marked by, among other things, fixed maturity plans (FMPs) offered by mutual funds. FMPs have emerged as a critical element in the asset management space in recent times, with many fund houses bringing out these products one after another.

Certain arbitrage funds, let me add in this context, are doing fairly well too. Further, a few players in the asset management industry have offered a range of smart products – the case of strategic bond funds can be cited here – which may well be tested.

However, it has to be remembered by all and sundry that debt products are not risk-free altogether. There are certain risks that the bond and the g-sec markets must contend with. Investors will have to contend with this factor (that is, these risks) when they make their choice.

It is completely true that stocks have moved far ahead in recent months. But this need not necessarily stop a systematic investor to approach the market in a calibrated manner. In fact, from the trends that we are witnessing, SIP (systematic investment plan) investors in equity funds have not been done away with altogether.

On the other hand, some of the larger participants are not currently willing to put in sizeable amounts of money at one go. I am referring to the HNI (high net worth investor) fraternity, sections of which seem to be a bit hesitant, now that stocks have so markedly treaded northwards. Yet, it is not that all super-wealthy investors are opting to stay out.

What are Eastern Financier’s plans on expansion of business? Where will new markets emerge for the company?

We have a network of 25 branches – not franchises. I do know that a number of players in this business have gone ahead to appoint franchisees. We are not willing to do this as a part of a definite strategy. We have a chain of branches to serve our clients instead.

While Kolkata is our main hub, several of our branches are in satellite centres. A branch in Mumbai is in the pipeline. Also on the cards is a branch in Guwahati. With reference to the smaller centres that we mentioned earlier, let me tell you that these are capable of generating considerable retail business.

Equity broking, mind you, is being offered selectively. Not all branches have this yet and we wish to drive this business (that is, equity broking) in a calculated manner.

I think newer opportunities will keep on emerging in the smaller locations. Considerable wealth is being generated in these markets, which should find reflection in the nature of transactions that individuals enter into.

The emergence of new opportunities will also be reflected in the use of advisory services. I am referring to perceptive clients who are more inclined to seek advice than before.

In Kolkata, how is the market for `alternatives’ shaping up? We are, among other things, referring to the art market here.

Well, as you know, this city is known for its creative talents. Art too is a serious pursuit here. Kolkata has a certain tradition in terms of collection, a number of good artists, a string of galleries … it all boils down to a thriving art market.

The most critical issue, however, relates to quality. It is not easy – indeed, it is extremely difficult – to locate and source high-quality work. Yet Kolkata has seen a lot of ‘retailisation’ here. Investments have flowed into art, courtesy people (not all of them ultra-rich) who know its significance and want to make it a part of their portfolio.

We too are opening our doors to art in a limited way. In fact, Eastern Financiers has already started mentoring select transactions. The plan is now to scale it up a little in terms of giving it an institutional framework. Clients, we feel, need a specific platform, one that will provide them with critical information. There is a gap here and we intend to do our bit to fill it up.

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