Ultra HNIs turn to equity, reduce debt exposure

Written by fe Bureau | Updated: Jul 24 2014, 07:25am hrs
The number of ultra HNHs (high net worth households) in the country has grown to 1.17 lakh in 2013-14 (estimated) from 1 lakh in 2012-13, accounting for about 0.05% of Indian households and amounting to an accumulated net worth of R104 lakh crore, according to the fourth annual survey of ultra high net worth Indians, Top of the Pyramid, by Kotak Wealth Management. While the number of ultra HNHs grew by 24% over the last four years, the accumulated wealth of these households grew by a whopping 32% year-on-year during this period, says the report.

Click here for graph

Ultra HNIs have taken a liking for the equity market and increased their exposure in anticipation of a stronger domestic economy. The Kotak survey reveals that the allocation to equity has increased from 35% in 2012 to 38% in 2013 with a consequential reduction in debt investment to 24%. While equity markets have underperformed in the last few years on account of the weak economic scenario, equity as an asset class is expected to gain the most with increased interest from ultra HNIs. Select ultra HNIs have gone to the extent of liquidating their debt and real estate investments to generate funds for investing in the equity markets, says the Kotak report.

Their discretionary and non-discretionary spends have risen from 30% of total income allocation to 45% this year. Gold and jewellery, also doubling up as investments, have been the single largest area of spend, followed by apparel and accessories, and then by luxury holidays, say the report.

The number of ultra HNHs is projected to nearly triple to 3.43 lakh with net worth of R408 lakh crore by 2018-19,

as per the report.