HNIs target tech, pharma, fintech in 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 views on the impact of the likely Fed rate cuts.

Edited excerpts:

Since you are a new player in the investment advice market, could you tell us a few words about yourself?

From 1999 to 2023, so since December last year — about 24 years — I was part of the banking system.

In 1999, I started my banking career with an Indian private sector bank called Times Bank. Within a few months, it was acquired by HDFC Bank. As an employee of HDFC Bank, I was made responsible for the retail portfolios of Delhi NCR clients. This is where my hands-on journey in the investment industry began as I was involved in banking and financial requirements of clients including wealth management.

From 1999 to 2023, I was a banker and held innumerable roles across retail, private and institutional banks HDFC, Citibank and Barclays India. Wealth management has been an integral part of my journey over these 24 years.

In January 2024, I launched my own company called Prisha Wealth Management Private Limited. It is a SEBI registered investment advisory firm.

What trends do you see in the HNI and Ultra HNI space?

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

Real estate investment has also been hit by government spending on infrastructure, making construction and engineering stocks attractive. Moreover, since real estate projects are heavily dependent on debt financing, any rate cut could significantly boost the sector, making it an attractive investment opportunity for those looking to take advantage of lower financing costs.

The second space is the startup space. They are interested in investing in startups, especially in sectors like technology, pharma, fintech, and healthcare.

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

HNIs are driven by a desire to be part of these emerging success stories and are willing to take calculated risks by investing in promising entrepreneurs and innovative companies.

These investments are seen not only as financial opportunities, but also as a way to help create a new wave of industry leaders.

Lifestyle products are another area. Lifestyle products such as jewellery, art and watches are not only seen as status and cultural symbols but also as investments that increase 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.

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

While there is some interest in mid- and small-cap stocks, the bulk of capital investment is in blue-chip stocks.

While mutual funds can be a good way to invest in stocks, I believe there are better ways to invest in stocks.

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 an even lower expense ratio. They are as easy to trade as stocks and can be bought and sold using a trading account.

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

If the Fed manages to cut interest rates without triggering a recession, it is expected to create positive market sentiment, which will benefit investors both in the US and around the world. However, if the rate cuts lead to a recession, it could introduce significant volatility to markets.

For Indian investors, the Fed’s rate cuts could have several implications. If the Fed successfully cuts interest rates while avoiding a recession, it could lead to increased capital inflows into emerging markets like India. This inflow of funds would likely strengthen the Indian rupee and boost equity markets, especially in interest-sensitive sectors like real estate, small-caps, and high-growth sectors like technology and communications.

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

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

If they continue to push ahead with changes, we can expect to see some sectors outperforming at lower interest rates.

A drop in borrowing costs could positively impact growth stocks, as future earnings tend to rise with lower interest on borrowed money. Technology and communication services are two sectors that could be leveraged/added to a portfolio.

The real estate sector benefits from lower borrowing costs, as REITs often rely on debt to fund acquisitions and development projects. Lower borrowing costs can boost profitability and increase cash flow, which REITs can use for reinvestments and the like.

Small-cap stocks fare better in lower interest rate scenarios because they are more sensitive to interest rates than large-cap stocks, as the latter rely more heavily on external growth financing.

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

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

Padmaja Choudhury is a freelance financial content writer with around six years of experience, focusing on mutual funds and personal finance.