Mr. Shobhit Mathur on “financial planning and wealth management”
Institute of Management Technology (IMT), Nagpur had the privilege of hosting Mr Shobhit Mathur- Senior director, Kotak Investment Advisors Ltd for a guest lecture on October 17, 2020. He delivered an insightful lecture on the topic ‘financial planning and wealth management’. The following is an excerpt from the interview with him-
Q1) With COVID affecting the economy, could you explain the strange phenomena of the economy slumping and the stock market rising at the same time?
Ans. The way one has to look at it is that you have the economic slump because of one big event which is the pandemic, however the economy has got all the support of the central bank and governments by assuring that they will put more money into the economy and have made the support clear with increased spending and have come out with an outright statement that ‘we will support the economy until it requires our support, so clearly wanting the economy to find enough levers to bounce back. The Stock markets doesn’t take into account what the situation is as per the current scenario, rather what the scenario could be in the future. The embedded value or empirical value of a company is a combination of its future cash flows, but in the current scenario, even the current year cash flow is being compromised. So, the market is looking at the cash flows from an optimistic point of view and ignoring this one year of earning loss. For example, when NIFTY at 11,500 in December 2019 vs NIFTY at 11,500 in December 2020, the impact of 1 year of earning collapse has been ignored. It is also easier for Governments and financial institutions to focus on economic reforms in tough years since they too are pushed to the wall in tough years, but these reforms will take time to come to the fore yet the market is optimistic.
Q2) What do you think venture capitalists will look for while investing in a venture post COVID?
Ans. Venture capitalists on the other extreme are satisfied with the way companies have prepared themselves for the crisis. India is starting to see many new start-ups and scale- ups and many are on a growth trajectory, but got halted due to COVID and were tested heavily, so the one’s who come out strong will have strong foundations. To that extent, the venture capitalists will look for future readiness of the companies, rather than focussing on their present.
Q3) What in your opinion should the Government do to overcome such slumps in the future, going by the past trends?
Ans. We would want the Government to use this opportunity to bring in more Foreign Direct Investment, entice companies going to China. The reforms suggested in the previous parliament session has been bold but they still need to do more for ease of doing business, labour and agricultural reform has happened, but land reform is what requires more clarity. One also has seen the benefit of India’s global relations and sees us as a favourable trading partner.
Q4) Do you feel disintermediation is a boon or a bane for the financial ecosystem?
Ans. When it comes to wealth management industry in particular, we believe that figital is the way forward. Wealth management can’t be completely digital, since there is a certain amount of EQ which goes into advising people for managing their wealth. An application can only recommend what you should do, but the human element of trust and experience would be missing from the investment decisions. People find more comfort in talking to experts on things that they aren’t comfortable with. But there are some elements that can be digitised, like banking transactions, cash withdrawals and so on. But when it comes to decision making, human interaction works best.
Q5) In the current market scenario, how credible do you feel Real Estate Investment Trusts are? Should one invest in them when the economy has slumped, in anticipation of a growth?
Ans. At Kotak, we do have a buy recommendation on REITs and each such recommendations come with a risk factor. Work from home might be the future for some sectors but not all, since office spaces provided a good social infrastructure and allowed people to bond and build trust at work, which increased their work outcomes. So, while there are risks with regard to how the future of office spaces will pan out, there will be innovations in this space too.
Q6) Since everything has moved to digital, how was your experience interacting with the students of IMT Nagpur?
Ans. To be frank, I would have loved to be physically present because the interaction would have been far more at a personal level, but the interaction was good and there were quite a few thought provoking questions and I enjoyed answering them and look forward to such future interactions.