Market doesn’t have HNIs’ vote of confidence yet

Rich reduce or maintain holdings in Sensex stocks over the past six months even as mkt re-tests 15K levels THE STOCK market may be showing signs of shrugging off its post-Budget blues, but India's wealthy remain unconvinced about its short-term direction and appear unwilling to open their wallets just yet.      A SundayET analysis of shareholding pattern of high networth individuals (HNIs) in the 30 BSE Sensex stocks shows that the rich have either reduced or maintained their holdings in them over the last six months, clearly suggesting that while the market benchmark index may be re-testing 15,000 levels, it still does not have the vote of confidence of the rich.      In case of bluechip stocks such as Bharat Heavy Electricals (BHEL), ICICI Bank, Maruti Suzuki, and Oil & Natural Gas Corporation (ONGC), these wealthy investors have brought down their holding by more than 25%. Several wealth managers that SundayET spoke to said that HNIs, basically individuals with investments of at least Rs 1 lakh in any single stock, had booked profits following the elections rally and had since lowered the equity exposure as they rebalanced their asset allocations. The SundayET study took into account investment patterns of around 84,000 such individuals.      "Capital preservation is still a high priority for them (high networth individuals or HNIs) rather than a quest for high returns," says Rajesh Saluja, CEO of ASK Wealth Advisers. Clients, he said, had decreased their equity exposure by 10% in their portfolios before the union budget, noting that a typical aggressive portfolio right now had a 40% exposure to equities, down from 50% at the year's start. The BSE Sensex is more than 95% up from its lows of 8,047 points hit on March 6, and surged to the year-high of 15,732 points on Friday in the wake of good earnings report.      But HNIs, say wealth managers, feel the equity market is not yet out of the woods and may well fall in the short-term. Expectations Indian companies will post poor results going forward and continuing worries about the global economy has meant these investors are not willing to go overweight on equities just yet.      The post-elections rally in May, which saw a sharp rise in values, had left many of these investors wary rather than eager to take the plunge, says Reliance Money CEO Sudip Bandyopadhyay.      "The feeling of uneasiness has still not subsided and HNIs, having learned their lessons from last year's devastating market losses, don't want to make the same mistake of going overweight on certain assets such as equity and real estate," he said. Volatility still very high  WEALTH managers say these investors feel that the market is hostage to two key risks — the fate of the monsoon and a fear the global recovery could be slower than expected. "Most of them are waiting for panic sell-offs so that they can gradually enter the markets. The belief now is that the Sensex under 13,000 points is a good time to allocate around 25-30% of the desired allocation," says Richa Karpe, co-promoter of Altamount Capital, a Mumbai-based multi-family office firm.      Although the probability of a steep fall in the equity market has eased, volatility is still high. The National Stock Exchange's India Volatility Index (VIX), better known as the Fear Index — is still trading in the high 30s, which implies that the market has not yet stabilised. For India's wealthy, last year's events, which had a knockout effect on their wealth, are still fresh in their minds.As per the World Wealth report of Merrill Lynch and Capgemini, India's HNI population dipped by over 30% in 2008, the second largest decline in the world. The HNI base saw the fastest rate of growth — more than 20% — in 2007. Some wealth advisers who work closely with the rich say the euphoria witnessed in the stock market since March this year had provided some investors to cut losses and repair allocations.      "Although they are more positive towards equity and trying to regain their appetite for risk, the approach is still a tentative one," says Pradeep Dokania, managing director and head of global wealth management at DSP Merrill Lynch.