India: Wealthy Investors Exit Stocks, Seek Protected Exposure to Nifty-50

From The Economic Times (India).

As the tides have turned, many well-heeled investors are moving out of stocks to park some of their money in structured products which are linked to leading market benchmarks.

Structured products, offered by banks and brokerages, have taken off in the last two years. But now with the Sensex having lost over 5,000 points from its peak, securities houses are sensing a greater demand for such products in the last few months.

A foreign bank recently offered a 15-month tenor product with a Nifty participation of 160-170%, with a knockout barrier of 20%. Standard Chartered was the first to introduce a “cliquet” structure, wherein investors “lock-in” profits earned in each year. Given the way that markets are behaving, bankers are tweaking products.

Earlier products which participated on the upside found favour with investors, but today products which participate the market upside as well as the downside find appeal. Hence, popular structures today have a 20-30% participation on both the upside and downside, with tenures of 18-24 months.

Today banks like Citi, HSBC, Standard Chartered and private sector players such as ICICI, HDFC and brokerages such as Emkay, Motilal Oswal, Edelweiss sell these products to their high net worth clients.

The minimum ticket size for these products is Rs 10-20 lakh. “A lot of HNI clients who do not want to risk their capital and want a slice of capital market returns opt for capital-guaranteed products,” says Abhay Aima, group head, Private Banking and Third Party Products, HDFC Bank.

For full article from The Economic Times (India), click here.