In an interview with BusinessLine, Anand Bhatti, founder and chief investment officer of the investment firm, said that, after the financial crisis, India has seen a rise in the share of passive income investing (PII).
“Since the financial meltdown, the share in passive income has been rising at a faster rate than the growth of the stock market.
I am sure the stock prices are doing well in the private sector, but we are seeing a dip in the corporate sector,” said Bhatt, adding that the growth rate in passive investment is much slower than in the financial markets.
He said that the current low level of growth of stock prices, coupled with a high interest rate, has made passive investment a much less attractive investment option.
“In the past, we used to see investments in companies such as auto dealers and auto manufacturers, and we were also investing in public companies.
However, we now have a lot of private companies that are either doing well or are growing rapidly, which is a big concern.
We are seeing investors who want a diversified portfolio in the sector,” he said.
Bhatt added that the private companies are investing at a much higher pace, while the public companies are not.
“The private companies have a much greater share of the passive investment, which may explain the recent drop in the stock price,” he added.
Investors are looking for a diversification of portfolios, which will allow them to invest in a wide range of companies, said Bhat.
He added that most investors prefer diversified portfolios, because it will give them a wider range of investments.
“We believe the average investor is going to prefer diversification to a fixed-income portfolio.
I think we need to look at an average investment that will have a diversifying impact on the portfolio.
It should have a long-term horizon,” he explained.
Investment in passive investments is also on the rise, with over 80% of investors considering it a good investment, said Dr. Shri Sudhir Kumar, CEO, Anadolu Group.
“This is a good time for passive investments, especially in the sectors that are in the slow growth.
In the financial services sector, we have seen a lot more consolidation.
In other sectors, there are more consolidation,” he stated.
Bhat said that there is a lot to be learned from the private investors in India, adding, “I am sure there are many other private investors who are investing in the same way.
They have not had to face any crisis, so they are going to be able to grow their businesses in a more sustainable way.”