‘Giving Financial Advice Is Not Like Selling Lipstick’: Radhika Gupta, MD, CEO, Edelweiss

The Indian financial ecosystem is on firm ground and the participation is increasing from various income groups. There are opportunities galore and the need to be on the right side of caution.

Seasoned investor, Radhika Gupta, MD & CEO, Edelweiss Asset Management shared her insights in an exclusive interview.

Republic: Tell us about the changing landscape of asset management in India as you see it today. 

I think it's a great time to be in the asset management business. As India is getting younger and more prosperous, more people are turning to financial instruments. More people have faith in the equity story in India, and they're choosing mutual funds and retail mutual funds as asset management vehicles. 

Many of us would know that today retail investor savings into SIPs are about $2 billion or Rs 17,000 crore a month. And increasingly, there is more awareness about the power of regulated asset management products like mutual funds as a vehicle of choice for consumers. So, I don't think there's been a better time to be in the asset management industry than there is today.

Republic: You are a seasoned investor. You've been in the field for a while. What have been your key leadership techniques which have helped you tide over a decade of being in the business? 

I think leadership is something that no classroom can teach you. You really learn it on the job, you really learn it in crisis, and you really learn it from people. I think a leader must be honest and accountable to her stakeholders. And I think that is my primary lesson from leadership. So don't carry the load alone. 

When you are in a crisis, when you need help, be honest with your board, be honest with your investors. Be honest with your customers, our investors, in our case, and with your team. And I think that really carries you a long way. 

Focus is extremely important. So, the temptation in business to do ten things is very common, especially in a market as booming as India, but staying relentlessly focused on a few sets of things and delivering excellence in them. And I think the third quality is resilience. Leadership should have leaders should have a certain amount of optimism and resilience. 

I think I learned the most as a CEO in periods like 2018 and 19, which were much tougher for the business, where people are coming and asking you those tough questions, and you really must gather all your chutzpah and tell people to move ahead. So, I think a certain amount of resilience and optimism. 

Republic: Where does the opportunity lie for growth? Do you have a couple of tips for our viewers?

I think my primary tip is to have faith in the Indian story and Indian equities. I think over the next decade, you will see India grow into a five and $10 trillion economy from two and a half thousand to $5,000 GDP per capita and you will see great companies come out of India. 

You already have about 800 companies that are more than 3,000 crores in size and you will see many and as an investor invest in Indian equities and benefit from India's economic growth. We are very lucky to be investing in a market like India were doing something very simple such as a SIP into Indian equities, you are earning 12-13 per cent a year. 

Even global investors today are looking at Indian equities. I mean, I've never had more questions about investing in India from foreign investors than I have today. So as Indian investors, we perhaps are in the luckiest place. My other advice is to start early, ditch the cynicism and really start your investing journey early and take advice from the right people as you embark on this journey. 

Republic: Coming to advice, there is a lot of dialogue exchanges and speculations going around finfluencers. The government is not happy with them. As a serious contributor to this space, what is your take on advice which is coming off Instagram or other social media platforms? 

You ask a great question. Firstly, I think social media is a very powerful channel. I use it myself. But it has to be and it is the voice of young people, but it has to be used to give a responsible message. 

I'm very happy to see the action that the government and the regulators are taking on influencers. And I believe two problems need to be addressed. One is as far as financial advice, it's not like selling lipstick. It is serious business and it needs to be given by people who are qualified. 

Nobody can go out there and give medical advice for free. And the same is true. So you can't be taking advice from a random person. Anyone who gives financial advice has to be registered, has to be regulated, has to be qualified to do it. The second is when you are receiving advice from someone you should know why they're giving you that advice and what the incentives behind that advice are. And if we can make sure these two things are disclosed.

Social media is used to give good messages about having the right expectations. Being a long-term investor is very good. But social media used to give wrong sensational messages and lure people into quick get-rich schemes. 

Republic: You just recently expressed your views on cryptocurrencies and said that anything which is unregulated is not worth your time or investment you can elaborate on that? 

It's very simple. I believe any investor should invest in an asset class that is regulated by the government and where you have a recourse if something goes wrong. India has seen so many equivalents of Chit funds and Scams and XYZ where crores of investors have lost money just by investing in something unregulated. 

If your government has not regulated it, it's not for you. Because one day there's going to be a problem and you will have an issue. And this is not something I'm saying today, this is something I've been saying in the context of cryptocurrency for the last couple of years, thankfully. And by the way, India has got ten or had at some point ten crore cryptocurrency users. 

We have four crore mutual fund investors to put this into perspective. So it is a problem. I'm glad. Over the last year, some of this has been addressed in the conversation with the government on tax and regulation in cryptocurrency. And I think some of the recent global events around Binance and FTX just underscore what? So you know, even as we speak, small caps are sort of grabbing. 

Republic: Do you think this outperformance is going to last or is it just a ripple effect of how the markets are performing in general? 

So I think small caps are a little misunderstood. In 1998, about 25 years ago, our market was very small and there was a limited section of meaningful companies. The average market cap of a large cap company was three 4000 crores. 

Today, as I said, you have 800 companies with a market cap above 3,000 crores. A small-cap company on average has a market cap of 12,000 crores. So this belief that mid and small-cap companies are small untested business models that are poor corporate governance is a myth. 

In fact, in many sectors like diagnostics chemicals, and capital goods, your market leaders are in the mid and small-cap space. So I think one, we have to change the lens. 

Now, I'm not saying go out and buy small caps and rush to buy them, but I think the answer is a middle path. If you have to build a portfolio for the future, it has to be a combination of large, mid and small. And we forget that while small caps have run up, these companies are also delivering earnings. So small caps in technical terms are at the midpoint of a valuation cycle, the early point of an earnings cycle. 

To an ordinary investor, my only message is don't invest in small caps because you see a 30 per cent last year return. That's a recipe for disaster. Invest because you believe in the companies and the segments and invest for seven to ten years knowing that you will have a year of losing 50 per cent. Then go ahead and make the investment. Have courage, but also be sure and have realistic expectations that are not anchored to the last year because that's when things go wrong. 

This brings me to the next question, which is that if you want to have a sustainable pattern in investing, what should it be? And be a responsible investor, what are the key qualities that a person should have? 

I think sustainable investing, and I'm not talking about things like ESG here, I think sustainable investing for an individual is really about a set of goals and investing consistently. Investors who have been in this business for 20 years and still we see professional investing investors do a really bad job at timing the market, most people do. 

The easiest approach is to automate decision-making. One of the reasons I think SIPS are so good is because every month you get a salary and just like you pay tax, investment is also a tax. You just decide to go ahead and invest, and it is a habit and it's a habit that is repeatable and automatic and you don't wake up every morning and think. So I think sustainable investing is about habits and it's about goals. 

There’s a big buzz about these big numbers coming up. Sensex is to be at one lakh Nifty is going to cross 20,000. All these golden numbers which are coming up what is your take? 

I mean this is just a natural growth that people should because I don't see that there should be a huge rise and then fall or something. I think it's going to be an eventual growth for the corporate market and the capital market. I find this buzz about numbers funny. I mean it's like why do you celebrate a century in cricket? Like why is the guy who earned 100, much better than the guy who was on the 99? I mean one lakh on Sensex and all these things are just numbers. 

The fact is I think over the last 20 years Indian equities have grown at 12 per cent and this is a period when we've had COVID, we've had the financial crisis, we had the tech bust and so much has happened and now we are sitting at a point where private sector capex is happening. You have so much positive reform that is happening in this country your demographics are favourable so I look at the story that Indian equities can deliver. You will have these milestones; you will have many other milestones. I also echo what you said that this journey is not a 12 per cent a-year journey you will have years of tremendous rockiness. Right now. There's a lot of smiling everywhere. I go because markets have been green, but equity markets are plus 20 and -20 that's also the reality of the business that we are in. Thanks for highlighting that, Radhika. 

Republic: And Then Finally, my favourite question what does it take to Sustain as a woman leader in the financial world, what does it take to sustain? 

I think a lot of resilience, a tremendous amount of thick skin. Because for all my career, people have asked me, what are the terrible things that have happened to you as a woman? Or what are the challenges? And every one of us has these stories. But the reality is you develop a thick skin, and you focus on your work and you move on. 

I also think it takes a certain amount of ambition, and I think Indian women don't vocalise their ambition enough. It takes you to tell yourself that, I can do this and do it really well, and to ask for those big opportunities that often your male colleagues are very good at asking for and say, if there's an opportunity, I want to do it, and I can damn do it well. So it takes a certain amount of ambition and asking and then putting your head down and working and believing that. 

“Kuch to log kahenge, logon ka kaam hai kehna”

As long as they're talking about you, you must be doing something good. So be responsible, be ambitious.