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What is HNI (High Net-Worth Individual)?

If you’ve ever wondered what it takes to be considered a High Net-Worth Individual (HNI), it’s all about the assets. An HNI is someone with substantial financial assets, usually over ₹5 crores. These individuals often play a big role in the stock market, especially when it comes to IPOs, where a portion of shares is reserved just for them. Getting to know how HNIs invest and how they influence the market can be eye-opening for anyone looking to grow their wealth.

HNI Meaning in the Stock Market

In the stock market, high net-worth individuals are those with a net worth exceeding ₹5 crores in liquid assets. They typically hold a variety of assets like stocks, bonds, mutual funds, and real estate. Even though SEBI doesn’t officially define HNIs, they’re classified as Non-Institutional Investors (NIIs) when they invest over ₹2 lakhs in an IPO. Since high net-worth individuals have more capital to invest, their actions can significantly impact stock prices and overall market sentiment.

Types of High-Net-Worth Individuals

Now that you know what HNI is, let’s try to understand some common categories of high net-worth individuals in the market:

Type

Description

Net Worth Range

Affluent Investors

These are the up-and-coming high net-worth individuals with assets ranging from ₹1 crore to ₹5 crore. They’re often professionals or entrepreneurs aiming to grow their wealth.

₹1 crore – ₹5 crore

Mid-Level HNIs

These investors hold assets between ₹5 crore and ₹50 crore. They tend to invest in premium products like private equity and high-end properties.

₹5 crore – ₹50 crore

Ultra-HNIs (UHNI)

With assets above ₹50 crore, these individuals invest in luxury real estate, global markets, and exclusive investment funds.

₹50 crore and above

Affluent investors are those just starting on their HNI journey, building a diverse asset base to grow their wealth. Mid-level high net-worth individuals are more established and often look for sophisticated investments to upscale their portfolios. Ultra-HNIs, at the highest tier, focus on wealth preservation and accessing global markets and high-value assets.

Investment Strategies for HNIs

  • Stocks

    High net-worth individuals often invest in a mix of large-cap, mid-cap, and small-cap stocks. This helps spread risk and capture growth potential across different market segments.

  • Bonds

    Corporate and government bonds are common HNI investments. They provide regular income and add stability to the portfolio.

  • Mutual Funds

    To grow wealth over the long term, HNIs allocate funds to equity, debt, or hybrid mutual funds, depending on their financial goals and risk tolerance.

  • Private Equity

    For better gains, some high net-worth individuals invest in private equity by buying shares in unlisted companies. They may hold these investments until the company goes public.

  • Private Debt

    HNIs may lend money to private companies, earning interest income. This option carries higher risk but can generate steady cash flow.

  • Real Estate

    Many high net-worth individuals invest in real estate directly or through REITs, aiming for rental income and capital appreciation.

Role of HNIs in IPOs and Market Movements

When it comes to IPOs, HNIs play a crucial role by investing hefty sums. SEBI reserves 15% of IPO shares for Non-Institutional Investors (NIIs), which include HNIs. To apply as a high net-worth individual, you need to invest over ₹2,00,000 in one go. This gives you a shot at securing a larger share allocation. Since HNIs can pump in significant funds, they can drive demand and influence the stock’s performance on listing day.

Benefits and Challenges Faced by HNIs

Benefits:

  • Access to Exclusive Investments: Private equity, hedge funds, and structured products are more accessible to high net-worth individuals.
  • Personalised Wealth Management: Banks offer tailored investment advice, tax planning, and estate management.
  • Better Rates and Fees: HNIs often get preferential treatment, including lower fees and higher interest rates.

Challenges:

  • Market Volatility: Larger investments can mean bigger losses during downturns.
  • Liquidity Issues: Private equity or real estate investments may not be easy to exit quickly.
  • Regulatory Risks: Unregulated investments, like private debt, carry higher risks of fraud and default.

How to Become an HNI Investor

  1. Step 1: Build Your Asset Base

    Start by setting aside at least ₹2,00,000. You can do this by investing in stocks, mutual funds, or real estate. The goal is to have enough funds ready for your IPO application as a high net-worth individual.

  2. Step 2: Check Bank Access

    Make sure you have internet banking access. HNIs can’t use UPI for IPO applications. Alternatively, you can apply through a physical form at your bank.

  3. Step 3: Log In and Apply

    Once logged in to your bank’s internet banking portal, go to the IPO section. Look for the 'IPO Application' tab.

  4. Step 4: Select the HNI Category

    Choose the HNI category. This step is crucial to be considered under the HNI quota for the IPO.

  5. Step 5: Place Your Bid

    Enter the number of lots you want to bid for. Your total investment must be over ₹2,00,000. The highest bid price will be automatically blocked, as per IPO rules.

  6. Step 6: Block Funds via ASBA

    The ASBA (Application Supported by Blocked Amount) facility will hold the bid amount in your bank account. The money stays blocked until IPO allotment is confirmed.

  7. Step 7: Wait for Allotment

    If shares are allotted, the blocked amount will be debited. If the IPO is oversubscribed, you might get a partial allotment and the remaining funds will be released.

Conclusion

High Net-Worth Individuals can influence the financial markets to a great extent. They often get access to exclusive investment options, sway IPO allocations, and can even impact stock prices through bulk trades. But the risks are just as high. To make it as an HNI, you need a solid investment plan, smart risk management, and a steady focus on growing your assets.

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Disclaimer :

The information on this website is provided on "AS IS" basis. Bajaj Broking (BFSL) does not warrant the accuracy of the information given herein, either expressly or impliedly, for any particular purpose and expressly disclaims any warranties of merchantability or suitability for any particular purpose. While BFSL strives to ensure accuracy, it does not guarantee the completeness, reliability, or timeliness of the information. Users are advised to independently verify details and stay updated with any changes.

The information provided on this website is for general informational purposes only and is subject to change without prior notice. BFSL shall not be responsible for any consequences arising from reliance on the information provided herein and shall not be held responsible for all or any actions that may subsequently result in any loss, damage and or liability. Interest rates, fees, and charges etc., are revised from time to time, for the latest details please refer to our Pricing page.

Neither the information, nor any opinion contained in this website constitutes a solicitation or offer by BFSL or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.

BFSL is acting as distributor for non-broking products/ services such as IPO, Mutual Fund, Insurance, PMS, and NPS. These are not Exchange Traded Products. For more details on risk factors, terms and conditions please read the sales brochure carefully before investing.

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