People have been making more enquiries with regards to US equities, it will have to been seen if this will emerge has a new trend in the next 12-24 months, Shiv Gupta, Managing Director, RBS Private Banking tells Tania Kishore Jaleel.
With the markets sentiments slightly positive, has been any change in investment patterns? Have people started moving their money from debt instruments to equities?
It is still early days to say if people have started allocating chunks of their money to equities. Nevertheless, certainly, the level of optimism has gone up and conversation concerning equities has changed.
People are having conversations on wanting to move their positions to equities slightly and to a certain extent this interest is getting reflected. And when I say these are say early days there are are some people who are looking at taking this as an opportunity to exit as they had entered a little earlier.
So discernibly, you are not likely to see a sudden shift to to equity allocation across the whole composite. The notion that things are getting into recovery mode has to take hold and that typically takes a little longer. This is more of the first stage where people are coming from a position where there was no conviction to a situation where there is positive anticipation on how things will pan out.
Concerning your clients, have they been looking at investing in innovative asset classes what with equities not giving stellar returns?
There has been a growing aversion to risky asset classes and it is more skewed towards fixed income products. Therefore, that pattern has been there. With regards to innovative investments, one has to take it with a pinch of salt. India is a market where the breadth and depth are limited by local regulations. Alternative asset classes are skewed; be it real estate or gold. There is a limitation with regards to the number of avenues that one has. Real estate is something Indians have cultural affinity for, even when it comes to private equity. This has remained constant. Having said that, even when it comes to real estate, there are limitations with regards to liquid options.
What about investing abroad? Is that something your clients are considering?
The extent of the usage of the liberalized route available to investors to invest in offshore equities has been lower than what one would have liked to see. People are still of the view that there are greater structural opportunities here. However, there are early signs of opportunities in American equities. People have been enquiring more about US equities and people acting on these enquiries have slowly started creeping in.
It is yet to be seen if there is a whole scale trend that will emerge and this we will have to judge in the next 12-24 months. We might see a slightly different investment pattern emerge then. This is just the starting point. US is the largest markets in terms of market capitalizations and some of the companies listed there are the most visible, so people have an understanding of it. People do ask about emerging markets too, but US equities is top on the list.
How has been RBS’s performance in India?
Our clients are entrepreneurs and senior professionals and our target is are people with £1 million investable surplus. Having said that, with regards to our India operations, I’d like to think that we are in a good position. India is a strategic growth market for the wealth division of RBS. That means that are is a focus on growing India for the long term. In light of that we have been investing in India for the last few years and have seen positive results. Our team size has grown by 60-70% over the last couple of years. We have around 100 people in our wealth team across four branches. We have seen client asset liabilities grown 50% this year.
RBS Group has been in the news for the wrong reasons off late internationally. Has this made clients jittery in any ways?
RBS has a strategy for India. It is the third largest in terms of market and number of people for RBS and it has a solid presence here. India serves an important purpose for the RBS Group. Clients have a lot of confidence in the direction that we are headed.
With regards to equities , what are the sectors that look good given the current economic scenario. What is RBS advising their clients?
We like health care, consumer staples and IT while interest rate sensitive sectors are gaining attention with reversal in interest rate cycle is round the corner.
By when do you think interest rates will start to soften?
With the recent improvement in the fiscal policy action, which RBI has been awaiting for a while, we could see the easing cycle to kick off in the fourth quarter of this calendar year. We expect 25 bps easing in the current quarter while another 50 bps in the first half of the next calendar year. However, in the near term with further improvement in the interbank liquidity and low credit demand lending, market rates are likely to ease.
Investors will be look at RBI for cues. Clearly over the next few quarters rates are expected to fall. So with regards to fixed income; investors should have allocation longer duration products.
The Government has announced some much needed reforms recently. What are your views?
It is still early days, however, the markets have given it a thumbs up. These reforms were absolutely required after such a long time of virtual standstill. However, that said there are still more such reform measures required; be it in the space of subsidies or divestments and so on.
