Navigating Wealth with Raghav Gupta: A CEO’s View

28 Apr 2025 , 01:06 PM

As a part of IIFL Capital’s “Leadership Speak” series, Dr. Gaurav Kulshreshtha, Head of Products at IIFL Capital, engages in a conversation with Mr. Raghav Gupta, Joint Chief Executive Officer of Securities & Private Wealth at IIFL Capital on Asset allocation, Talent in the Wealth Management sector, and the evolving landscape of the Wealth Industry.

Gaurav:
To delve deeper into India’s investment landscape and the evolution of asset allocation in the country, given your nearly three-decade experience in the private banking industry, how have you observed the concept of asset allocation evolving in Indian markets?

Raghav:
Asset allocation involves distributing funds across different products and asset classes—equities, debt, fixed deposits, gold, or real estate. For us at IIFL Capital, asset allocation is more than just distributing funds across various asset classes; it’s about mitigating risk. The primary objective is risk mitigation while keeping the client’s interests in mind and understanding their goals. Hence, asset allocation ensures that these client’s goals are met.

Gaurav:
In your experience dealing with HNIs, Ultra HNIs and family offices, what role do equities and debt play in client portfolios?

Raghav:
Earlier, the primary asset classes for Indians were gold and real estate. However, over the past decade, there has been a paradigm shift in investors’ mindsets. They have come to understand the power of equities. Previously, people were risk-averse and viewed equity as speculative. However, over the last 7–10 years, people have realized that real wealth creation happens in equities. Most HNWIs now allocate about 70% of their funds to equities, with the remainder going into gold and debt for safety. We also advise against investing 100% in equities due to their high volatility. Despite their potential for high returns, they can also cause investors sleepless nights. Today, most equity investors have either monetized assets or inherited wealth but prefer to invest for the long term rather than speculate.

Gaurav:
Considering the current market volatility, what investment opportunities do you see for Indian private banking clients?

Raghav:
Private banking clients have become very sophisticated. Today, there is a broader spectrum of products available to them. Not just equities, but UHNWIs and HNWIs are investing in private equity, unlisted equities—anything that can help in wealth generation. Even within debt, it’s not just bonds; investors are also exploring high-yield funds, private credit, and real estate funds. These are now part of their debt allocation, whereas earlier, it was primarily corporate and government bonds. Now, people are diversifying even within asset classes. In equities, you can invest in large-cap, mid-cap, and small-cap companies. This can be seen as different classes within the same asset class, making a significant difference.

Gaurav:
Do you believe in strategic asset allocation, tactical asset allocation, or a mix of both?

Raghav:
I recently discussed with a fund manager that in the past, it was all about strategic allocation—just buy and hold. But times are changing. Investment scenarios are evolving faster than ever, so a mix of both is necessary. Strategic allocation is essential for long-term investments, but there should also be tactical allocation. I believe investors don’t want to be on a rollercoaster ride throughout their lives and prefer a more hands-on approach. So, the basic principle is to stay invested for the long term and make money. However, this narrative can be questioned at times. It’s important to have a mixed portfolio. Again, it’s very individualistic. Some clients panic and want to take money off the table whenever they make a profit, while others prefer to stay invested long-term. Therefore, a good private banker needs to offer both options, depending on the client’s preferences.

Gaurav:
As we’ve discussed strategic and tactical allocation, you also mentioned that asset allocation has undergone a paradigm shift. Do you believe asset allocation will further change over the next decade?

Raghav:
In my understanding, the asset allocation scenario is evolving. HNWIs and UHNWIs are looking for innovation. They don’t want to invest in plain vanilla equity; they can do that themselves. The next generation of investors is open to innovative products and seeks to invest in them. Hence, the private banking landscape is trying to innovate so that clients can benefit from full diversification across multiple sectors along with innovation. Unfortunately, we don’t have Bitcoins in India. But globally, investors find Bitcoins attractive. Some view it as speculative, while others find it intriguing. So, it’s something each person chooses.

Gaurav:
What specific factors have driven the increased participation of retail investors in Indian markets?

Raghav:
In my opinion, the government has played a significant role through awareness programs related to asset classes. Programs like “Mutual Fund Sahi Hai” and endorsements by sports personalities discussing the concept of investing early have also contributed to increasing retail participation.
You can also observe how BSE 100 companies have performed. They have provided around 16.5% returns over the past 10 years, whereas returns from fixed deposits have been diminishing, and interest rates have been declining in India. Therefore, people can’t beat inflation by just keeping their money in FDs and banks. Inflation isn’t just about consumer indexes; it’s about the rising costs of daily life, travel, and essentials. If you’re not making double-digit returns, you’re eroding your capital.
Only equities can provide inflation-beating double-digit returns in the long term. According to a Morningstar report, 40% of HNWIs have 50% of their investments in equities. This clearly shows the shift in investors’ mindsets. They also understand that real estate, once a favoured asset class, has liquidity issues. The price difference between buying and selling is significant.
In the last two decades, people have recognized the power of equities. You can sell when you need money, leverage it, and it’s much more transparent compared to other assets. Hence, there’s been a shift from traditional assets to equities.
Additionally, SIPs have seen significant contributions from rural parts of India, starting with as little as ₹500. The recent budget’s tax exemption up to ₹12 lakh has put more money in the hands of the middle class. Even a small portion of this entering the Indian equities market can lead to substantial inflows

Gaurav:
Foreign markets have also provided higher returns in recent years. What is your view on investing globally? Also, what are some key considerations for global investments?

Raghav:
In my opinion, this is a good diversification strategy. Why should any investor be restricted to one country? As we see, the Rupee has been depreciating continuously over the last 50 years. Since independence, the Rupee has depreciated against the Dollar by 3.5–4% annually.
Just converting Rupees into Dollars doesn’t make it an investment. Every investor should consider investing abroad. The government, under the Liberalized Remittance Scheme (LRS), permits remittances up to US$250,000 per person per financial year. This amount can be invested in foreign debt and equity. Most HNWIs are diversifying around 5–7% of their wealth into foreign assets. However, if the Rupee strengthens, there could be issues. Additionally, taxation isn’t favourable. If an investor invests abroad, the tax rate in India doesn’t treat it favourably.