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Indian equities have rebounded sharply since April. What are the factors driving the momentum?
The rebound in Indian equities, which includes some opportunistic buying, has been driven by strong investor confidence in India’s economic fundamentals, long-term growth story, and relative insulation from global tariff disruptions. That said, markets have yet to fully work out the potential second-order effects of trade disruptions. These, combined with broader macro uncertainties, could still generate volatility.
On valuations, while large-cap stocks are trading near historical averages, mid- and small-cap segments remain elevated at approximately 15 per cent and 30 per cent above their respective long-term averages.
What types of products are high net-worth investors gravitating to?
High-net-worth investors are becoming more sophisticated and seeking better diversification, higher yields, tax efficiency, and exposure to new asset classes. As a result, interest in equities has remained steady, debt allocations are more selective, and alternative investments are seeing a massive surge.
Within alternatives, HNIs are increasingly allocating to private markets through PE and VC funds and, sometimes, through direct private deals. On the debt side, high-yield private credit is popular for its attractive 13-15 per cent yields, while venture debt offers similar returns with added upside from equity warrants. We also see interest in commercial real estate and infrastructure through AIFs and REITs/INVITs.
What are your views on gold as an asset class?
In Sanctum’s view, gold is an essential component of any asset allocation strategy, given its low correlation with other assets, role as an inflation hedge, and historical performance during geopolitical or macroeconomic stress. These reasons, combined with strong central bank demand and a shift in allocations away from US Treasuries more recently, have helped gold appreciate about 55% over the past couple of years.
While a near-term correction is probable after such a strong rally, any pullback would be a good opportunity for under-allocated portfolios or longer-term investors to build exposure.
How are clients viewing overseas investing at this juncture?
As HNI families become increasingly global, often with children studying or residing abroad, interest in international investing has grown steadily. Traditionally, Indian investors have favoured overseas equities over debt, with the latter mainly used for liquidity management.
Real estate overseas continues to appeal, particularly for personal use, but limited leverage options under LRS have been a constraint. Given current global uncertainty and volatility in US bond yields, many investors are adopting a cautious, wait-and-watch stance.
How has the wealth management industry grown in recent years? What’s the outlook?
India’s wealth management industry has grown at an impressive 15–20% annually in recent years, driven by massive wealth creation, buoyant markets, financialization of savings, expanding product offerings, and supportive regulation. Established firms have scaled significantly, and a spate of new entrants has emerged.
The outlook remains strong. Entry barriers remain relatively low, so we may see more players enter. However, building a scaled and profitable franchise can take a long time. With rising competition and margin pressures, some consolidation is likely.
What are the trends and challenges impacting Sanctum Wealth and the industry at large?
Several structural forces are driving growth. Economic expansion and asset price appreciation are fueling wealth creation. Regulatory evolution has helped widen the product universe, especially in alternatives. There’s a growing democratization of access to sophisticated strategies. And while still early, technology, particularly AI, offers transformative potential.
Competitive intensity is rising, and margins are under pressure. There is a shortage of skilled talent, made worse by limited investment in training and development. This leads to high churn and cost inflation. Meanwhile, the slow adoption of digital solutions is holding back productivity gains. That said, technology remains a significant opportunity if deployed strategically and with scale.
How have costs and the regulatory landscape changed, and how has it impacted margins?
On balance, regulation has been a long-term positive, creating a stronger, more transparent framework that has improved trust and enabled product innovation. However, short-term pressures are real. Fee caps, incentive guidelines, advice segregation rules, and tighter oversight of manager compensation have compressed margins. At the same time, talent scarcity has pushed compensation costs higher. Firms that succeed in combining operational efficiency with robust compliance and governance will be best positioned to thrive in this evolving landscape.
This article first appeared on The Hindu Business Line
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