HNIs are targeting tech, pharma, fintechs in the start-up space, says Priti Goel of Prisha Wealth Management

Priti Goel, Founder & CEO, Prisha Wealth Management Private Limited, a SEBI-registered investment advisory firm talks about her journey, investment trends and her views on the impact of likely rate cuts by the Fed.

Edited excerpts:

As you are a new entrant to the investment advisory market, can you share a little bit about yourself?

From 1999 to 2023, which is December of last year—about 24 years—I have been a part of the banking system.

In 1999, I started my banking career at an Indian private sector bank called Times Bank. Within a few months, HDFC Bank took over. As an employee of HDFC Bank, I became responsible for retail clients’ portfolios in Delhi NCR. That’s where my practical journey in the investment industry started as I took care of client’s banking & financial requirements, including wealth management.

From 1999 to 2023, I was a Banker and have done innumerable roles across Retail, Private and Institutional Bank of HDFC, Citibank and Barclays India. Wealth Management has been an integral part of my journey throughout those 24 years.

In January 2024, I launched my own firm called Prisha Wealth Management Private Limited. It is a SEBI Registered Investment Advisory Services company.

What are some of the trends that you are witnessing in the HNI and Ultra HNI space?

The first prominent sector is real estate. HNIs are increasingly investing in real estate, with a strong preference for residential properties, especially post-pandemic. This trend is prominent both in India and internationally, with Dubai being a favoured destination due to its proximity to India and a significant Indian presence. HNIs see real estate as a stable investment, with around 30% of them focusing on this sector.

Real estate investments have also been influenced by government spending on infrastructure, making construction and engineering-related stocks appealing. Additionally, as real estate projects are heavily reliant on debt financing, any reduction in interest rates could significantly boost this sector, making it an attractive investment opportunity for those looking to capitalise on lower financing costs.

The second space is the start-up space. They are interested in investing in startups, particularly in sectors such as technology, pharma, fintech, and healthcare.

These sectors are seen as part of the next big growth stories, with the potential to become the next unicorns.

HNIs are motivated by the desire to be part of these emerging success stories and are willing to take calculated risks on promising entrepreneurs and innovative businesses.

These investments are viewed not only as financial opportunities but also as a way to contribute to the next wave of industry leaders.

Lifestyle products are another area. Lifestyle products such as jewellery, art, and watches are not only seen as symbols of status and culture but also as investments that appreciate over time. HNIs can enjoy the immediate benefits of ownership while also securing potential financial gains as these items increase in value over the years.

Equities, especially blue-chip companies are a favoured asset class among HNIs. HNIs prefer blue-chip stocks for their ability to provide a balance of growth and security in their investment portfolios.

While there is interest in mid-sized and small-cap companies, a larger portion of their equity investments are in blue-chip stocks.

While mutual funds can be a good route to get exposure to equities, I believe that there are better ways to invest in equities.
 

What are these options?

ETFs and Index funds have lower expense ratios than regular mutual funds which are largely actively managed funds.

Passive investing using index funds and ETFs has proven to generate higher returns than some actively managed mutual funds. Their expense ratios are lower. Between index funds and ETFs, ETFs have a further lower expense ratio. These are easy to trade like a stock and can be bought and sold using one’s trading account.

There is an expectation that the Fed is going to cut interest rates. How do you see it and what might the impact on the Indian economy?

If the Fed manages to lower interest rates without triggering a recession, it is expected to create positive sentiment in the markets, benefiting investors both in the U.S. and globally. However, if the rate cuts lead to a recession, it could introduce significant volatility in the markets.

For Indian investors, the Fed’s rate cuts can have several effects. If the Fed successfully lowers rates while avoiding a recession, it could lead to increased capital inflows in emerging markets like India. This influx of funds would likely strengthen the Indian rupee and boost equity markets, particularly in sectors that are sensitive to interest rate changes, such as real estate, small-cap companies, and high-growth sectors like technology and communication.

So what should global investors in emerging markets do ahead of a potential U.S. rate cut?

Investors can avoid making short-term changes in their portfolios based on modest changes in interest rate policies. They should stay with your long-term, diversified portfolio.

If they still want to make adjustments, certain sectors are expected to perform better in a lower-rate environment.

The decline in borrowing cost can positively impact growth stocks, as future earnings tend to increase with lower interest payments on loans taken. Technology and communication services are two sectors which can be leveraged/added to the portfolio.

The real estate sector benefits from lower borrowing costs as REITs often rely on debt to finance acquisitions and develop projects. Lower borrowing cost can enhance profitability and boost cash flow which REITs can use towards reinvestment, etc.

Small cap stocks tend to do well in lower interest rate scenarios as they are more sensitive to interest rates than large cap firms as the small firms use more external financing for growth.

Rate cuts will make Treasury bills, certificates of deposits and money market funds less attractive.

Riskier assets like emerging markets and metals are likely to do well. Precious metals like gold and silver too should benefit from rate cuts.

Padmaja Choudhury is a freelance financial content writer. With around six years of total experience, mutual funds and personal finance are her focus areas.