A capital of a million rupees 10 years ago could well have made you a very rich man. Enough to have wealth managers clamour for your attention. However, things look different now: a million rupees won?t take you too far, in case you want to build some assets. A clear indication of how the purchasing power has declined is evident if one sees the portfolio of assets one could build with Rs 10 lakh 10 years ago, and now.
First things first. A million rupees isn?t big money for fund managers any more. ?We don?t usually work with clients with Rs 10 lakh of investible funds; we would have probably done that a decade ago. Now, we require a commitment of at least a crore,? says a portfolio manager with a brokerage. He is justified. Because a decade ago, your million could have fetched you 7,000 shares of Reliance Industries, but now you would garner just about 470 shares. Now, with such numbers, it would be difficult to build a well-diversified portfolio, he adds.
But then, a decade ago, the Sensex was hovering around 3,000 levels and the Nifty was not even in four digits. Same is the case with gold. High crude prices and a weakening dollar have seen gold prices surge in the past few years. A decade ago you could get 235 tolas (an ounce) of gold, but now, this money will fetch you 80-odd tolas.
The greatest climb has been in the real estate sector. Rs 10 lakh could fetch you a two-bedroom hall in a decent location in Mumbai suburbs. Now, you have to shell out four times the number and compromise on the location as well.
?But then, affordability has also risen,? says Prabal Sarma, a human resource consultant. Pointing out the salary increases for executives, Sarma says an employee drawing Rs 25,000 as salary a decade ago with a decent firm would be drawing more than a lakh now. And this even if he had stayed with the same firm as a job switch would have definitely earned been more since it?s not uncommon to see job hops get a 100% raise, Sarma adds.
The number of high net worth individuals (HNWI), with net assets of at least $1 million, increased by 20.5% to 1,00,015 in India last in 2007, second only after 21.2% growth in Singapore, according to the World Wealth Report released by Merrill Lynch and Cap Gemini.
However, affordability will start taking a hit soon, reckon financial advisers, as inflation numbers are now rising to what are clearly levels of concern, after being subdued for quite a while. Rs 100 a decade ago will now be well worth Rs 26. Real interest rates in banks are now being completely eroded by inflation and taxation. Those who have had floating rate home loans will feel the pinch even more as rates are most likely to go up further. And this too, after one considers that petrol prices have been administered. As the finance minister said, ?These are difficult times.?