Outlook on Wealth Management sector: Angel One, 360 One could give 10-20% return in 1 year

Domestic equities saw a sharp rally from the start of FY24 with Nifty crossing the 20k mark supported by strong macros and upbeat earning growth.

This is also reflected in the revival of the number of active users on NSE which increased for the second consecutive month to 32.7m in Aug’23 from 31.9m in Jul’23.

Wealth management business in India is well poised to register a healthy CAGR of 12- 15% over the next five years. UHNI, HNI, mass affluent, and retail offer significant growth opportunities.

New-age wealth management firms are also taking a more holistic approach by integrating banking and lending services and emerging as a comprehensive, one-stop solution for clients, thereby increasing the value of their relationship.

As per the Knight Frank Wealth Report 2022, the Indian UHNI population and HNI population are expected to clock a CAGR of 7% and 12%, respectively, over 2021-26.

The UHNI space is experiencing a transformative phase marked by several key drivers. These include 1) inter-generational wealth transfer, 2) increased interest in complex products such as international investments, and 3) evolution from a purely physical to a ‘phygital’ model (Tech plays a more prominent role for RM than for clients).

The HNI and mass affluent segments are being serviced through innovative, tech-driven, AI, and ML-led modes. Account aggregation will be one of the key enablers for further accentuated growth in this segment.

The rise in HNI & affluent investors will continue to drive the demand for wealth management services tailored to the unique financial needs of these individuals.

We expect the mass affluent segment to grow at ~15% over the medium term with technology and platform services being the key differentiator in this fierce competitive landscape.

AI-powered chatbots, Robo-Advisory, and Digital Platforms are paving the way for next-gen wealth management solutions. These solutions are a huge success in the mature markets.

In India, as the sector matures, it is likely to witness further innovation and competition, leading to more offerings that are diverse and enhanced services for investors.

RM-led advisory services are essential to effectively serve the UNHI segment. There is a noticeable shift in customer behavior, with clients increasingly willing to invest in high-quality advice.

The wealth management industry in India has been placing significant emphasis on crafting tailored portfolios for its customers. Its relevance has grown even more in the current ecosystem, wherein the industry is transitioning from distribution-oriented models to advisory-focused ones.

Many investors today are also keen on customization as it boosts tax efficiency, making it a win-win scenario for the new-age clientele seeking hyper-personalized experiences. Tech is playing a substantial role in facilitating this transformation.

360 One WAM: Buy| Target Rs 620| LTP Rs 502| Upside 23%
We believe 360ONE is well placed to gain out of the emerging trends as it 1) enhances its reach in the lower tier cities (earlier focus was on metros and top 10 cities), 2) diversifies into the INR50-250m net-worth customer base vs INR250m+ earlier, and 3) invests in technology to strengthen its phygital approach.

We expect 360ONE to register an AUM CAGR of 13% over FY23-25 and earnings CAGR of 12%.

Angel One: Buy| Target Rs 2050| LTP Rs 1851| Upside 10%
ANGELONE is a perfect play on 1) the financialization of savings and 2) digitization. The management continues to invest in technology to strengthen its position.

It has expanded its offerings by introducing new services (MF, IPOS, and ETFs). We expect a 16% earnings CAGR over FY23-25E.

(The author is Head – Retail Research, Motilal Oswal Financial Services Limited)

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)