What’s your view on the market going forward? Where do you see the Nifty?
The overall market trajectory continues to remain positive. The market breadth was narrower, and the benchmark Nifty50 outperformed the other broader indices by a significant margin in August and September. The market focused on quality stocks, and correction in non-quality stocks has been quite substantial. It seems more likely that the market returns will be a little more calibrated, but there are good themes in the market, earnings momentum continues, and flows remain strong.
Earnings momentum sustained in Q1FY22 and we believe that the trend will continue in Q2FY22 given the gradual reopening of the economy and significant rise in the vaccination rate. Currently, we value Nifty at 22x on FY23 earnings, which translates into a December 2021 target of 17,700. While we remain optimistic on the market, focus on earnings sustenance will be key moving forward.
Do you think midcap and smallcap stocks have peaked out? What are the key factors to watch for in mid and smallcap stocks in the next one year?
Small and midcap companies tend to grow faster than the large-cap universe in an economic recovery scenario. We expect these companies to register robust earnings growth as we go forward, further supported by a lower base. Since last month, the quality theme seems to be back in focus, as the market attention is shifting towards sustaining returns. Moreover, this divergence is quite significant in the smallcaps compared to the largecaps, clearly indicating that the allocation will increasingly move towards quality stocks across the board. We believe that there are attractive opportunities in the small and midcap space, and retail investors should explore the same.
Which are the sectors investors should watch out for?
Value and quality have been the best performing themes in the last six months, while the growth theme remains a laggard. The quality bucket has emerged as one of the best performing themes in the last three months. There are some exciting picks in the life insurance and private banking space to generate good compounding returns. With the pace of economic recovery, government spending is likely to be higher in the second half of the current fiscal, thereby making economy-linked sectors a fascinating space to watch out for going forward.
Has the new peak margin norms by the regulator impacted the cash market volumes? If yes, how will it affect the broking industry?
We have fully implemented the new peak margin norms as directed by the regulators. However, we have noticed the cash market retail volumes coming down from an average of Rs 43,000 crore daily to around Rs 37,000 crore. We have also seen that the delivery volumes moved from 28% to 36% compared to last year. This shift in the numbers shows that speculative trades have come down and, hence, the intraday cash volumes are down. While intraday volumes have come down, the Futures & Options volumes continue to grow.
Last year has been a very eventful year with 2 crore new retail investors coming into the equity market. How do you read the aggressive retail participation?
Retail investors have been unfazed by the market challenges arising during the pandemic. On the contrary, there is a renewed vigor and surge in market participation by retail investors. With time to spare and easy access during the lockdown, first-time investors started exploring markets. A cut in discretionary spending due to the lockdown led to the diversion of surplus funds for investing. Others leveraged the initial corrections as an opportunity to enter the market at attractive prices to build an alternate source of income. The complete digital onboarding process, too, made it easier for the new set of investors to participate in the markets. Just with a click of a few buttons, anyone can now access financial services and products in a fully secure manner, compliant with all regulations.
These new investors are conducting due diligence before investing. Easy access to information and a willingness to learn sets them on a path to become seasoned investors over time. Appropriate advisory, and availability of technology-driven products and services, can help these investors to stay focused, unaffected by market movements. This surge in retail participation is an opportunity for the industry to ramp up investor education initiatives and ensure we do not lose the momentum.
What are the trends you noticed from the behaviour of retail investors?
We have seen that significant world events shape and mould the behaviour of retail investors. Covid, too, played a crucial role in the emergence of technology-savvy, discerning investors. The financial uncertainties induced by the pandemic have made retail investors cautiously optimistic about markets. More investors now understand the importance of investing in markets for long-term wealth creation but at the same time, want to make informed decisions by doing their research or seeking expert help.
Another trend that we have observed is that more millennials are entering the markets. They are serious about money management, which is encouraging, given that an early start will help them fulfill their financial aspirations.
We have also observed that mobile has emerged as the preferred interface for new-age investors. For this on-the-move generation, smartphones bring the freedom to invest anytime and everywhere. Plus, most of these investors are on social media platforms, consuming information on a real-time basis. With easy access to markets via mobile apps, they prefer to be on the top of their investments.
There is an increasing trend in the use of basket products like smallcases. Ready-made investment portfolios and strategies offered by the basket products help investors make the most of the market even with limited expertise. Small and systematic investments to get started into equities make these products a favourite.
We have seen that more investors are now comfortable using online platforms to invest their money. Ease of use, access to reliable information, competitive brokerage, and a range of attractive products add to the popularity of online investing.
Currently, 50% of the volumes in the equity market are controlled by the top five discount broking firms. What’s the growth strategy at Axis Securities?
At Axis Securities, we are aggressively expanding our market footprints. Acquisition of Karvy trading accounts was one step in this direction. We were one of the first brokerage houses to introduce Global Investing and launched YIELD for buying and selling bonds & debentures online. Our RING Mobile App and RING Academy have received encouraging responses from our customers for the value they add.
We will continue to be a full-service brokerage house and focus on introducing more tech-enabled products that will empower our investors to grow their savings into long-term wealth. Discount brokers control a substantial portion of F&O volumes which we believe are largely speculative. In our experience, 95% of customers in the F&O segment lose money in their first trade itself. However, for seasoned traders, we have launched the new RING platform and competitive pricing under ‘Super Options’ to place an option order at an exclusive price of Rs 10, which is the lowest in the industry.
We aim to become a one-stop destination for all investor needs, helping them to make informed decisions. As we strengthen our market position, we aspire to be one of the top three brokerage houses in the country across all parameters, from the number of clients to unique client codes to profitability.