'Portfolio reshuffle reaction to meltdowns'

BANKER SPEAKS/ Balakrishnan Kunnambath, MD, SG Private Banking

SG Private Banking is planning to scale up its wealth management business. The bank recently acquired the non banking finance company (NBFC) Apeejay Finance and is awaiting the Reserve Bank of India (RBI) nod to launch wealth management services.

Balakrishnan Kunnambath, managing director, SG Private Banking and global market manager ""Indian subcontinent was in India. In an interview with Anita Bhoir, he shared his views on the Indian stock markets and his bank's plans in the wealth management space. Excerpts:

Are the Asian markets insulated from the global market slowdown?

The Asian economies, particularly India, may see no economic slowdown. But given the correlation between Asian and global equity markets, the flow of funds from foreign institutional investors (FIIs) may be affected. We may see a sideways movement in the market.

Although pessimists are highlighting the slowdown in certain sectors, we are optimistic that the Indian economy will continue to grow at eight per cent plus.

These are challenging times for the markets and market participants. The pressure to deliver on investments, continues. Investors prefer cap guaranteed products in sideways markets and we offer these in off-shore markets. Even if the market performs 30 to 40 per cent below the current levels, investors are assured of higher coupon rates in cap guaranteed products.

Are investors reallocating their portfolios following the meltdown in stock markets?

Reshuffling portfolios is a classical reaction to meltdowns. Investors are not aggressively moving towards cash-related products.

The Indian market is very strong fundamentally and certain stocks are attractive. Investors are watching to see how much of the global correction will spill over into our markets. It is only a matter of time before we see some good buying.

Traditionally, non-resident Indians (NRIs) hold a large portion of their wealth in US dollars. This is slowly eroding, with the US dollar depreciating against major currencies including the rupee. The US dollar is slowly losing prominence among the NRI community.

They are diversifying into other currencies. The NRIs, today, are open to having rupee exposures. They are following a short-term strategy and investing in short-term money market products.

How is SG's private banking business in India doing?

Soc Gen launched its private banking business in India in December 2005. We have two offices "" in Mumbai and Delhi "" and a small team in Bangalore. In two-and-a-half years, we have gained critical mass comparable with other European banks. We have a private banking team of about 50 people. Outside France, we have assets under management of $120 billion.

We are close to taking full control of the non-banking finance company (NBFC), Apeejay Finance. We have received approval from the Foreign Investment Promotion Board, while the nod from Reserve Bank of India (RBI) is awaited.

The NBFC will offer wealth management services. After receiving the regulatory clearance, we will offer cap guaranteed products. We currently market third party products. With the NBFC, we will be in a position to offer our products.

A lion's share of the business comes from NRIs. We have set up offices globally. Three to five years down the line, with capital account convertibility, we should be in a position to offer global products.

Today, the Indian market is going through a tough phase; investors are looking at diversifying their portfolios. In this backdrop, the $200,000 window throws a huge opportunity. The wealth in tier II and tier III cities needs to be tapped. With the NBFC, we would look at penetrating these markets.