India’s ‘wealth wave’ and the stocks that are poised to gain from it

• Listed Indian wealth managers’ stocks can gain from the ‘financialization of savings’ theme.
• While banks manage the maximum of the HNI wealth, wealth managers are gaining traction in the UHNI space.
• The number of UHNI is expected to see 50% growth in five years, says Knight Frank.
  

Indians are saving better, if not saving more. A lot of Indian savings are being directed to equities and more. The total assets under management (AUM) of mutual funds as of February 2024 stood at ₹54.54 lakh crore. As such savings swell, equities in general can gain, but there are ‘specific’ stocks that can gain more from the trend in particular.

According to Jefferies, broking firms, asset managers and exchanges can ride on this ‘wealth wave’. The sector is poised for a sharp growth trajectory as more and more investors increasingly bet on equity markets and investments.

As per a recent report by Motilal Oswal, the domestic MF’s equity AUM grew to ₹25.3 lakh crore in FY24, from a mere ₹1.9 lakh crore.

“We believe Indian Wealth Managers (IWMs) are well-placed to ride on India's economic growth & financialization of savings, especially into capital markets. Leading players will benefit from strong inflows and operational efficiencies to deliver 20-22% profit compounded annual growth rate (CAGR) over FY24-27,” observes Jefferies.

It initiated coverage on two companies – 360 One and Nuvama – with a buy call.

Super-rich and their super-growth

India's high net-worth individuals hold financial assets to the tune of $1-1.2 trillion. Institutional platforms manage over half of the same — with banks having a chunky share of around 30-33%.

Next come wealth managers who manage around 12-14%, and global players have around 5-7% share. The rest are disaggregated with independent financial advisors and distributors or are self-managed.

But wealth managers are fast gaining a share in the ultra-HNI segment with around 80% of the market. Global players are receding and smaller banks lack bandwidth for personalised solutions, says Jefferies.

UHNIs are defined as individuals with a net worth of US$ 30 million and over. Their number could swell fast, as per Knight Frank. According to The Wealth Report 2024 by the property consultant firm, UHNI numbers are expected to grow to 19,908 by 2028 from 13,263 in 2023 – that’s a 50.1% growth in UHNIs, in five years.

They’re also expecting their coffers to grow. “Indian UHNIs are expecting to witness an increase in their wealth during the year 2024. Almost 63% are expecting to witness a significant increase of more than 10% in their wealth value,” Knight Frank says.

Both these factors will add to the growth of Indian wealth managers. “Indian wealth managers’ share will be led by net inflows of 12-17% from higher wallet share in existing/new wealth & network expansion in new geographies, and mark-to-market gains,” says Jefferies as it factors in around 8% CAGR growth from it.

Mumbai has recently surpassed Beijing as the billionaire capital of the world. Adding that with buzzing equity markets, players in the business of wealth creation will be busy for the next few years.