Frantic Growth in the number of Indian Dollar Millionaires
The Wealth Management or Private Banking unit of Merrill Lynch and consultancy Cap Gemini remain bullish on the growth prospects of India’s wealthy. India has the fastest growing number of High Net Worth Individuals (HNI’s) as they are know in the industry. Rising 22% in 2007, the number of Indian dollar millionaires grew to 123,000 according to the Annual Wealth Report generated by the two companies. Last year fueled by high economic growth rates and soaring stock market valuations, the combined wealth of India’s HNI’s rose by 25.7% to US$440 Billion.
The report’s definition of HNI’S are individuals with investable financial assets of $1 million excluding residential property assets and jewelry. Rising equity indices meant that Indian HNI’s increased their exposure to the asset class by allocating 36% of their assets to equities, second only to Australia.
The global credit crisis and correction in equity valuations probably means that this year Indian HNI’s will continue to invest only sparingly in equities but domestic real estate investment is going to continue to remain a strong theme. Pradeep Dokania, head of global wealth management for DSP Merrill Lynch said “the investment pattern for individuals may shift away from equities this year, given the state of the markets. While real estate will remain the core investment area, there is likely to be a shift towards alternate investment areas, and fixed income products.”
Lots of Room to Grow
The concentration of HNI’s in India remains very low compared to the rest of Asia, at about 0.02% of the total adult population compared to nearly 2% in Singapore, 1.5% in Hong Kong and 1.3% in Japan. Vaidyanath Ramaswamy, head-capital markets for Cap Gemini said “this demonstrates a major opportunity for wealth management providers, given the pace at which wealth is being created in the country”.
The global credit crisis has had an impact on the wealth of Indian HNI’s; indeed it would be near impossible for anyone to remain unscathed as the global re rating of risk continues unabated. Agreeing with this assessment DSP Merrill Lynch’s Dokania pointed out that the exposure to stock markets was just 36% on an average for Indian HNI’s, and that other factors that lead to wealth creation in the country remain intact. “While GDP estimates have come down to around 7.9%, this is still a healthy rate. The savings ratio continues to rise as well,” he added.
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