HNIs are eyeing tech, pharma and fintech companies in the startup 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 Federal Reserve.

Edited excerpts:

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

From 1999 to 2023, that is, December of last year, approximately 24 years, I have been part of the banking system.

In 1999, I started my banking career with an Indian private bank called Times Bank. Within a few months, HDFC Bank took over. As an employee of HDFC Bank, I became responsible for retail client portfolios in Delhi NCR. This is where my practical journey in the investment industry began as I looked after the banking and financial requirements of clients including wealth management.

From 1999 to 2023, I was a banker and held myriad roles in retail, private and institutional banks at 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 company called Prisha Wealth Management Private Limited. It is a SEBI registered investment advisory services company.

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

The first sector to stand out is real estate. HNIs are increasingly investing in real estate, with a marked preference for residential properties, especially post-pandemic. This trend is prominent both in India and internationally, with Dubai being a favourite destination due to its proximity to India and a significant Indian presence. HNIs view 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 attractive. Moreover, as real estate projects rely heavily 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 that of startups. They are interested in investing in startups, especially in sectors such as technology, pharmaceuticals, financial technology 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 with promising entrepreneurs and innovative businesses.

These investments are seen 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 considered symbols of status and culture, but also investments that appreciate in value 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.

Stocks, especially those of blue-chip companies, are a preferred asset class for HNIs, who prefer blue-chip stocks for their ability to offer a balance between growth and safety in their investment portfolios.

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

While mutual funds It can be a good route to gain exposure to equities, I think there are better ways to invest in equities.

What are these options?

ETF (exchange-traded funds) and index funds have lower expense ratios than regular mutual funds, which are largely actively managed funds.

Passive investing through index funds and ETFs has been shown to generate higher returns than some actively managed mutual funds. Their expense ratios are lower. Between index funds and ETFs, the latter have an even lower expense ratio. They are easy to trade like a stock and can be bought and sold using one’s trading account.

The Federal Reserve is expected to cut interest rates. How do you view this and what impact could it have on the Indian economy?

If the Federal Reserve succeeds in cutting interest rates without triggering a recession, it is expected to generate positive sentiment in the markets, which will benefit investors both in the United States and around the world. However, if rate cuts lead to a recession, they could generate significant volatility in the markets.

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

So what should global emerging market investors do in the face of a potential US rate cut?

Investors may want to avoid making short-term changes to their portfolios based on modest changes in interest rate policies. They should stick with their diversified portfolio for the long term.

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

Declining borrowing costs can have a positive impact on growth stocks, as future earnings tend to increase with lower interest payments on borrowings. Technology and communication services are two sectors that can be leveraged or added to the portfolio.

The real estate sector benefits from lower financing costs, as REITs often use debt to finance acquisitions and develop projects. A lower financing cost can improve profitability and increase cash flow that REITs can use for reinvestment, etc.

Small-cap stocks tend to perform well in lower interest rate scenarios as they are more sensitive to interest rates than large-cap companies, as small companies use more external financing for growth.

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

Riskier assets such as emerging markets and metals are likely to perform well. Precious metals such as gold and silver should also benefit from rate cuts.

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