Lav Chaturvedi, ED & CEO, Reliance Securities leads the broking and distribution business for Reliance Capital (Reliance Securities Group). He has been with the Group for over a decade and has made several valuable contributions to the franchise. Chaturvedi tells ASHISH SINHA of BW Businessworld. Excerpts:
Equity markets have been quite turbulent in recent weeks, and there is increasing uncertainty around the second wave of COVID. Can you explain the impact on the trading platforms?
Trading activities broadly have remained unaffected irrespective of mounting uncertainty due to the second wave of COVID-19. The market is down by ~6% from all-time high seen in February, which shows that investors are still optimistic about Indian equities and key tailwinds domestic equities are still intact. The market clearly expects 3 months’ time frame for recovery from the second wave but anything beyond that may have a further impact on the negative side.
Are there enough safeguards in place for online trading? What more is required from the regulators/authorities?
Digitization is the new normal business model of the broking industry and culture of online trading will continue to flourish. In addition to ensuring secure and hassle-free trading platform, we at Reliance Securities are committed to ensure enough safeguards for online trading to our customers. Systematic Digital Engagement with our customers is our philosophy which means we believe in customer relationship that goes way beyond transactions.
From capital markets perspective, all initiatives, and actions need to be aligned with the three key objectives – ease of Onboarding, Providing equitable investment opportunities for all investors, and Building Investor’s trust
Your take on the Indian broking industry, especially in FY2020-21 amidst the pandemic?
The broking industry witnessed a sharp improvement in FY21, which is very much evident with record 14.2mn new demat accounts vs. 4.9mn in FY20 and robust 62% YoY increase in total ADTO. Evolution of hassle-free trading at one click and growing acceptability among the huge millennial population supported it. This bodes well for an overall increase in penetration of financial savings among retail. The key would be to maintain the growth trajectory.
Your take on the slew of IPOs since December-till date-proposed in 2021-22 compared to the previous few years? Why Indian markets appear to be detached from the ills of a pandemic on the overall economic growth?
We note that 18 key IPOs have been launched so far in 2021 with a total size of ~Rs250bn as against a total of 15 key IPOs launched in 2020. This clearly shows that there is a huge appetite among investors for IPOs in the market. Notably, most of the companies launched their IPOs is last one year were good and delivered a sound return to shareholders. Further, the low cost of funding environment and the absence of quality stocks in secondary markets at reasonable valuations also supported a flurry of IPOs with robust listing gains. No market in the world is detached from the adverse impact of the pandemic. India managed the last pandemic quite well with a superior recovery rate compared to other developed countries, which made domestic equities outperform. Also, global surplus liquidity is in play helping overall resilience.
Can you explain the risk of markets, earning expectations for FY 22, and which sectors to buy in? How big is the risk?
The persistent rise in COVID-19 cases and enhanced economic restrictions imposed by several states pose a threat to earnings recovery, which is the key risk for the market as of now. Nifty earning was expected to increase by 35-40% in FY22E led by a low base and revival in CAPEX. However, earnings growth expectations may be toned down post 4QFY21 earnings mainly to factor in ongoing economic restrictions. We remain optimistic about the recovery in CAPEX cycle in the country and the huge capital expenditures programme of the government for FY22E is still on the cards. Therefore, sectors considered to be key beneficiaries of Capex revival are likely to outperform markets in the medium to long term perspective. We maintain our positive view on quality infrastructure companies, cement, industrials, capital goods, and select auto.
How has Reliance Securities performed in 2020-21 as a leading share trading platform?
Reliance Securities is an agile broking platform; making a host of AI/ML features available to customers to help them make informed trading decisions. It’s one of the trusted platforms, with over 14 years of track record, that’s intuitive & strives to offer 100% system uptime. All these factors helped us to grow our business consistently Y-O-Y. Our robust customer onboarding & engagement processes and Systematic digital engagement helped us propel the customer stickiness and affinity on the platform. Today, it’s a multi-product platform where customers can opt for products customized to their needs.
How will the platform emerge this year?
We continue to strengthen our trading platform to make customers more comfortable with secure and hassle-free trading, which also makes us competitive. We believe the proportion of trading volume through the online trading platform is likely to record remarkable improvement in the coming years.
Budget 2021- Govt proposed single security in markets code, how it will impact the trading? Explain advantages and disadvantages? Why Govt need to focus on fast-tracking capital market reforms?
Unified Securities Market Code is a fantastic move, which should boost ease of doing business in financial markets. Further, this should essentially help to rationalize compliance costs. We believe capital market in India has already witnessed a significant transformation in last so many years. However, given current scenario, an integration of domestic markets with overseas markets should be strengthened by regulators. Capital Market reform is expected to be helpful in adopting a strong and transparent institutional framework in the financial market on par with international best practices.
Lockdown hindered last year to trade markets and this year with the second wave of COVID 19, how it will bring a drastic change in stock markets?
Unlike last year, the market is factoring in no nationwide lockdown this time. Further, the resilience shown by the market in recent times indicates that investors, in addition to no nationwide lockdown, are also factoring in daily caseload peaking-out by the end of May or mid of June and therefore notwithstanding some adverse impacts in 1QFY22, the economic momentum is expected to remain favourable from 2QFY22 onwards. Therefore, we believe investors will be buying at every correction of the market.
Lakhs of people took to equity investing in 2020 and they saw the market going only up. Now amid the volatility what would be your advice for retail investors right now?
Unlike last fiscal, the amount of volatility is expected to be high in FY22E due to the macro scenario and ongoing concerns of rising COVID-19 cases in the country. Hence, the patience of a large number of millennial investors is going to be tested. In our view, key tailwinds for corporate earnings rebound are still intact despite the current disruption led by the pandemic. Therefore, we advise investors to keep on accumulating quality stocks on a disciplined basis.
What is your take on banking and NBFC stocks? Is the sector out of the woods yet or could there be negative surprises in store?
Banking and NBFC stocks, which had started getting momentum with a visible improvement in collection efficiencies and asset qualities, again fell prey to the second wave of the COVID-19 crisis. Wider economic restrictions by several states again have posed risks to the asset quality of unsecured personal/MFI/consumer durable and even MSME loans. We believe these state-wide lockdowns/night curfews to ease by May end or mid of June. However, any such disruptions in economic activity always have a cascading effect in the subsequent months. This will impact both the credit growth and asset quality assumptions for retail banking and NBFCs. We believe prolonged mobility and economic restrictions in states can adversely impact the growth trajectory of Banks and NBFCs in the medium term.