Volatility whets risk appetite

Indians have not lost their risk appetite despite the volatility in the stock markets and a fall in real estate valuations, a survey released on Monday said.

A Barclays Wealth-Economist Intelligence Unit study on the behaviour and attitude of wealthy investors during times of market volatility said that 40 per cent Indians would raise the level of risk in their portfolios.

OPPORTUNITY IN LULL Investors looking to raise allocation to property in the next 12 months
Country	Investors (%)
China	57
India	48
Singapore	45
Monaco	45
Canada	42
Investors looking for higher overall risk in their portfolio
Country	Investors (%)

UAE43 China41 India 40 Singapore39 Monaco37 Source: Barclays Wealth Insights

India (40 per cent) ranks third on the list of countries where investors would increase the level of risk in their portfolios in a period of increased economic volatility. While the United Arab Emirates tops the list with 43 per cent, China ranks second with 40 per cent. In the United States, which is in the midst of a financial turmoil, 36 per cent investors were willing to increase the level of risk in their portfolios, the study said.

In India, the survey pointed out that 48 per cent of investors intended to increase their asset allocation to property.

Similarly, 34 per cent of the respondents intended to increase their exposure to equity in the domestic markets, while a third of those surveyed said they were keen to invest in overseas stock markets.

With the Reserve Bank of India easing overseas investment and remittance norms, many Indians are investing in foreign stock markets and purchasing property. Investment advisors said that a large number of high networth individuals were looking to invest in Latin America and West Asia.

The overall assessment was that during volatile conditions, investors from emerging markets were more likely to increase the level of risk in their portfolios, indicating that they regarded the environment as one of opportunity rather than hindrance. 

In case of property-related investment too, Indians were found to be more bullish than their counterparts in the Organisation for Economic Cooperation and Development (OECD) countries, where 37 per cent said they would bet on real estate.

Real estate developers have been hit hard by a rise in interest rates in recent months. Their stocks have been battered by over 60 per cent since January 2008.

“This partly reflects strong positive sentiment in future house price growth, but also a relative lack of depth in financial markets for some of these emerging market countries. With fewer choices than their developed country peers, emerging market investors inevitably have strong weightings towards property,” said the report.

Though investors might be willing to take risks, volatility does make them track the performance of individual investments more than that of the overall portfolio, the report said. Nearly half of the investors tracked the performance of specific stocks on a weekly, if not daily, basis.

“A focus on the performance of specific assets can cause investors to take decisions that may make sense when considered on the basis of a specific asset, but which are less rational in the context of the overall portfolio,” the report said.

Besides, there are many who would change their investment advisors and their bankers. The survey was conducted among 2,300 affluent investors with investable assets ranging from £500,000 ($900,000) to over £30 million ($54 million).