He exudes a sense of optimism. This is not surprising. After all, the Indian equity markets are having a good time. In this interview,Arun Thukral, managing director and CEO, Axis Securities, shares his thoughts on various issues. Excerpts:
Equity broking business is prone to cyclical downturns. Post-demonetisation, what is Axis Securities doing to get more investors into the fold?
Despite subdued markets in the past, we have been growing at a rapid pace both in terms of customer acquisition and active client base. Also, we are a full-fledged investment solution provider. We have been the beneficiaries of increased customer interest in mutual funds in the wake of demonetisation and healthy market performance. We firmly believe in the India growth story. We have advised our customers to stay invested in systematic investment plans, quality stocks and mutual funds over a long term to create wealth.
Equity asset class continues to be under-owned and under-penetrated. What is your view?
Though equity penetration is negligible currently, we are witnessing green shoots. The retail investor is now conscious towards equity given the underperformance of real estate and gold along with lower interest rates in fixed income products.
Has increasing activity of DIIs partly alleviated concerns around trading volumes, especially post demonetisation?
There has been a huge flow of retail money towards MF investments post demonetisation, especially through the SIP route. Backed by the retail money, the MFs had invested heavily in secondary markets — to the tune of ₹27,000 crore, especially post demonetisation between November 2016 and January 2017. In the same period, the FII were net sellers to the tune of ₹26,800 crore. Thus, post demonetisation, the DIIs had absorbed the selling done by FIIs alleviating the concerns due to FII exits.
Traditional non-bank led brokerages have got into newer businesses, aspiring to become diversified financial powerhouses. Also, increasingly, individual investors are preferring to transact online. The other challenge is from discount brokerages. How do you plan to steer clear of these challenges?
We have the advantage of being a full-service investment house offering a one-stop solution for all investments. This is in addition to the already existing banking relationship where the customer avails of various financial solutions offered by Axis Bank. We believe that India is deeply underpenetrated with around 3% population participating in the equity markets and the potential for expansion is enormous. We want to, therefore, take the Blue Ocean strategy and reach out to retail customers by creating awareness about the benefits of equity as an asset class. Standalone brokers and discount brokers largely focus on red ocean strategy where they want to get only high-volume customers purely on the basis of discounting.
How do you see the Indian economy in FY18?
We expect the Indian economy to do well in FY18. The banking ordinance will enable banks to handle their bad loans portfolio deftly. Resolution of bad loan issues would lubricate the economic engine of the country as more capital would be made available for lending and thus pursuing credit growth. GST is scheduled for implementation from July 1. It being a completely new regime, there would be a few teething issues initially but as the system gets implemented properly, say, over the next 6-12 months, we would start seeing results. Elsewhere in the world where GST has been implemented, the GDP has exhibited an incremental growth of 50-150 basis points over 2-3 years. We could see similar developments in India too.
What are your expectations on interest rates? Is RBI likely to cut rates this year?
We are in the last leg of interest rate cuts, if any. In last policy meet, RBI had reduced the policy rate corridor by increasing the reverse repo rate by 25 bps. This changes RBI’s stance to hawkish while they have not mentioned it categorically. The RBI is also concerned about the sticky core inflation in the light of inflationary pressures due to HRA component of 7th Pay Commission disbursal and reflation risk of commodities.
There are relatively very slim chances of a rate cut in the near future.
