'Volatile markets, inflation hitting HNIs'

Mumbai:The rise of high networth individuals (HNIs) in the country is getting affected in the 'high inflation, slow growth' scenario being witnessed at present, a top official of Merrill Lynch Wealth Management said here today.

"Inflation does impact high networth individuals as the purchasing power comes down. Also, the growth rate will come down due to higher inflation which will definitely have an impact on HNIs," its chairman for global wealth management Pradeep Dokania told reporters.

The subsidiary of Bank of America has scaled down its FY12 GDP growth forecast for the country to 7.3 percent from 8 percent at the beginning of this fiscal, he said.

Dokania said compounding the troubles for the segment, which has been steadily rising over the past decade with high growth, is the volatility in the equity markets which serves both as an asset class for investing as well as accounts for wealth in case of promoter HNIs.

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"If the stock market is down 20-25 percent, as it is this year, it will negatively impact HNIs," he added. In its Asia-Pacific Wealth Report for 2011, it found that 36 percent of investible wealth was allocated to equities in 2010.

In 2009-10, the country's HNIs' wealth grew 22 percent to $582 billion on a 9.1 percent GDP growth, 24 percent increase in market capitalisation and a growth in national savings rate, the report said.

Given the steady rise in HNIs' over the years, a slew of financial institutions have started wealth management practices. A majority of them came out with research and studies on rise in HNIs and changes in investing patterns. Merrill Lynch Wealth Management's Managing Director Atul Singh said given the uncertainty in equity markets, HNIs are not so confident about investing in equities now, while fixed income is a more preferred category.

Real estate has not seen a fall while gold is also witnessing interest as a good alternative, he said.

Reuters