'More investors now view the stock market as a valuable opportunity, though many still seek quick gains, leading to a rise in futures and options trading.'
India's equity markets, wealth management, and asset management industries are in a golden age, highlights Hiren Ved, director and chief investment officer at Alchemy Capital Management, in conversation with Puneet Wadhwa/Business Standard.
What is your view on the equity market landscape?
India's equity markets, wealth management, and asset management industries are in a golden age.
For the first time in decades, the average investor is viewing equities as a serious asset class and investing their savings in the stock market.
When I entered the equity markets in 1990-1991, very few people were willing to invest.
The Harshad Mehta scam changed things dramatically, but we've come a long way since then.
Today, investors are far more informed and understand the long-term benefits of equities.
However, only 5 to 6 per cent of household savings in India are currently in equities, compared to much higher levels globally. I believe this will eventually reach double digits.
The accessibility of equity markets has improved with digital platforms and online brokers, eliminating the need for local brokers or physical branches.
Now, the focus has shifted from creating investor intent through education to enabling easy execution via digital channels.
Given that investors have access to easy digital trading, why do they still need advisory firms?
Financial products, even something as basic as a fixed deposit, still benefit from a personal touch.
People often prefer face-to-face guidance, whether from a bank representative or regarding insurance.
In smaller cities, investors might use systematic investment plans but still need help choosing the right mutual fund.
Even in advanced markets, wealth managers and intermediaries are crucial for guiding decisions.
IMAGE: Hiren Ved.
Photograph: Kind courtesy, Alchemy Capital
However, most investors click the button and then they're done.
The shift to online platforms will continue, especially among younger investors who prefer self-management.
However, middle-aged and older investors often need more assistance.
While investing moves online, the speed of adoption varies, and many in smaller towns who speak vernacular languages find English financial jargon challenging.
True engagement will involve both digital tools and localised communication.
Have investors lost the art of creating wealth in the mad rush to make a quick buck?
More investors now view the stock market as a valuable opportunity, though many still seek quick gains, leading to a rise in futures and options trading.
Initially drawn by the potential for quick profits, many investors experiment before transitioning to long-term strategies.
Regulatory measures help manage risks, and while quick profits can be fleeting, equities offer better tax advantages and returns compared to fixed deposits.
The ability to understand and observe successful models is crucial, whether in sports, politics, business, or investing.
Role models like Rakesh Jhunjhunwala inspire new investors and shift perceptions of the stock market from risky to a legitimate wealth-building tool.
Many investment apps showcase the portfolios of successful investors, such as Radhakishan Damani, Ashish Kacholia, and Vijay Kedia, motivating people with examples of substantial wealth creation.
This visibility helps transform the perception of the stock market from a risky gamble to a legitimate path for wealth generation.
Do you believe India's equity taxation is justified?
Initially, the government used tax policies to encourage equity investment, such as zero long-term capital gains tax and tax benefits for mutual funds.
The goal was to attract more investors in a capital-scarce economy.
Recently, the removal of the angel tax reflects the need for more risk capital.
As economies mature, governments often introduce taxes to redistribute wealth.
In developed countries, high taxes support social security systems, while in India, with its smaller social security net, taxes are still low. This could change as India's social needs evolve.
THE QUICK BUCK DILEMMA: ARE WE LOSING WEALTH CREATION?
- Stock market now seen as a prime investment opportunity
- Surge in futures and options trading for quick gains
- Investors lured by rapid profits, then pivot to long-term strategies
- Regulatory safeguards in place to manage risks
- Quick wins may be fleeting; equities yield superior tax benefits and returns
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Feature Presentation: Rajesh Alva/Rediff.com
