HNIs moving out of equities

Most of the money has found its way into liquid debt-based funds and gold.

The current uncertainty in the global economy and the subsequent volatility have seen domestic retail investors shy away from Indian equity markets. High net worth individual (HNI) traders have halved their activity in the past two months. Reason: Increased risk aversion.

According to the Bombay Stock Exchange data, average daily trading in the clients category, which represents HNIs, has come down to Rs 2,500 crore in June, down from the Rs 4,000-crore levels in the beginning of the year. In June 2009, it was above Rs 5,000 crore.

“Retail investors, especially HNIs, have been circumspect. While they are confident about the India story, they are concerned about global developments,” said Ajay Bagga, head of private wealth management, Deutsche Bank.

According to Kanwar Vivek, CEO, Birla Sun Life Wealth Management, “Many retail investors have come out of the market and are sitting on the sidelines. They are waiting for the markets to touch new lows and will come in when there is a definite trend.” The volatility has also scared investors and delivery-based volumes are down, he adds.

In such a scenario, most of the money has found its way into liquid debt-based funds and gold. Bagga said, “We see a lot of demand for liquid and short-term debt, and in the long-term investments space, a demand for structured products that offer capital protection. There is also strong demand for gold ETFs (exchange-traded funds) and international gold funds.”

With gold prices zooming, gold ETFs look like a safe investment avenue. Gold-based ETFs have generated a return in excess of 10 per cent over the past month, the best among all fund categories.

“Real estate and real estate-based funds, too, have caught investor fancy and that is the reason why areas like Mumbai and Gurgaon have seen a 25 per cent appreciation in luxury properties,” says Samir Jasuja, CEO Prop Equity, a real estate research firm.

Ritesh Vohra, managing director, real estate, Saffron Advisors, says real estate funds have been as attractive and a better alternative to directly buying property. “HNI investors, however, have not been looking at funds that are into pure developmental investing. Speciality and structured funds are being preferred,” he said.