Indian Investors Urged: Allocate 35% to Global Stocks, Explore High-Yield Indian Real Estate Private Credit

Ketul Sakhpara, co-founder and CIO of BayFort Capital, recommends that Indian investors should diversify their portfolios by allocating a minimum of 35% of their financial assets to securities outside India. This global diversification is presented as crucial for protecting portfolios and boosting returns, as global markets do not move in perfect sync, thus reducing volatility and creating a smoother long-term return path. Sakhpara mentioned that investment options previously accessible only to Ultra High Networth Individuals (UHNIs) are now available to High Networth Individuals (HNIs), particularly for innovation sector stocks listed globally. He used China's example, where GDP boomed but stock market returns were low, to illustrate that domestic success doesn't always translate to market performance. He stressed adding uncorrelated assets, like US indices, which have historically shown low correlation with Indian markets, for portfolio balance. The US market is highlighted as attractive for Indians due to no investment tax, though Indian taxes will apply. Akshat Jain, Director at Seeco Wealth, discussed private credit opportunities in Indian real estate, especially after the Real Estate Regulation Act (RERA) formalized the sector post-2016. Increased working capital needs for real estate projects, arising from new regulatory requirements for project-specific entities, have created a funding gap that banks and NBFCs cannot fully fill. This gap offers an arbitrage for individual investors to subscribe to debentures issued by developers, potentially earning yields of 15-17%. These debentures are secured by multiple layers of collateral, including mortgages, charge on receivables, and guarantees. Seeco Wealth facilitates these investments and suggests allocating 10-20% of fixed income to private credit.

Impact: This news offers actionable strategies for Indian investors to enhance their portfolios through global diversification and alternative investments. It could lead to increased investment flows into foreign markets and the Indian real estate debt sector, influencing asset allocation and market dynamics. Rating: 7/10.

Difficult Terms:

Portfolio Diversification: Spreading investments across different asset classes, geographies, and industries to reduce risk.

Securities: Financial instruments like stocks and bonds that represent ownership or debt.

Volatility: The degree of variation of a trading price series over time, usually measured by the standard deviation of returns.

Uncorrelated Assets: Investments whose prices tend to move independently of each other, providing diversification benefits.

Ultra High Networth Individuals (UHNIs): Individuals with investable assets exceeding a certain high threshold (e.g., $30 million).

High Networth Individuals (HNIs): Individuals with significant investable assets, typically above $1 million, excluding primary residence.

Private Credit: Debt financing provided by non-bank lenders to companies, often for specific projects or growth.

Real Estate Regulation Act (RERA): A law in India designed to protect home buyers and boost transparency and accountability in the real estate sector.

Debentures: A type of long-term debt instrument issued by companies to raise funds, essentially a loan that pays interest.

Collaterals: Assets pledged by a borrower to a lender as security for a loan.

Arbitrage: The simultaneous purchase and sale of an asset in different markets or in derivative forms to profit from a price difference.

Yield: The income return on an investment, typically expressed as a percentage.