In conversation with Anshul Arzare, Chief Business Officer, Yes Securities

Market remains structurally positive for the long term, and this belief stems from fundamental factors and not speculative takes, believes Anshul Arzare, Chief Business Officer, Yes Securities

What are the biggest opportunities for the broking industry in 2022? 

Given the rapid internet penetration into India's tier 2 and tier 3 cities (and now also in tier 4 cities), the ongoing PAN and Aadhaar linkages with mobile numbers, trading accounts have got a big boost. The number of active investors in the equity market has more than doubled in the last two years over the base created in the past 20 years. And the future possibilities are equally bright. There is enormous untapped potential in tier 2, 3, and 4 cities for various financial products as the retail population in these regions primarily have only deposits as part of their financial assets. 

The most significant opportunity is India's overall low penetration of demat and trading accounts. During 2000-2019, around 3.6 crore demat accounts were opened, whereas, during April 2019 - March 2022, the count grew to 8.4 crore. Despite the impressive leap, it is just a minuscule when considering a 140 crore plus population. Further, 80 per cent of Indian adults only have savings accounts. So, the scope for growth is humongous. Retail participation will play a pivotal role in the equity market growth story. 

How will IPO frenzy impact the opening of new demat accounts, and what is the growth potential for 2022? 

IPOs act as a critical catalyst to enhance people-orientation towards investment in equities. Last year's IPO activity bears testimony to this fact. As many as 63 IPOs tapped the market in FY20-21 and raised approx. Rs 1.31 lakh crore. Important is to see that, in the process, bids worth Rs 39 lakh crore were received. More than 15 IPOs were subscribed over 100 times. From an average of 4 lakh new demat accounts opened every month in FY20, it soared to 20 lakhs per month in 2021 with November 2021 contributing around 29 lakhs accounts. 

With more IPOs lined up in FY22, we foresee excellent traction in opening new accounts. In January 2022, over 40 lakh demat accounts were opened, mainly due to the buzz around the LIC IPO. IPOs not only helps in getting new investors to the capital market but also help in increasing the depth by widening the overall market cap with the fresh capital infusion. 

What technology will most likely now disrupt the broking industry and how is the industry prepared for it?

Without the slightest doubt, automated trading across all segments, especially F&O, will be a mega disruption. A paradigm shift is at play, where options is turning into an investment strategy rather than a hedging strategy. We already have seen the daily volume of options premium move up from Rs 4,295 crore in 2019 to Rs 21,090 crore in January 2022. 

There's been a radical shift in consumer behaviour. As a result, the inherent characteristics of the trade are undergoing a massive transformation. Tech-enablement will be the key differentiator in ensuring retail investors enjoy a seamless and hassle-free investing experience in the near future. The good part is that the broking industry has welcomed this wave of tech-led disruption by demonstrating the digital ability and agility to tap new-age investors (Gen Z and millennials), as also the growing number of women investors through a host of tailored products offered through smart mobile apps. 

Needless to say, the shift in favour of tech-enabled offerings will also impact the sphere of technical analysis. Analysts will now need to tweak the current parameters to draw meaningful conclusions. Till date, analysts were primarily focused on investor behaviour in a particular situation. Now, investors' trade patterns will primarily be the outcome of an automated program. The actual behaviour of investors will thus no longer be the focal point of analysis. 

Are we done with the correction in 2022 or do you think there is more downside left? 

The markets are currently in unchartered territories, given the lingering shadows of the ongoing Ukraine crisis, crude oil price hikes, the ABG Shipyard scam, and massive fiscal deficits across different economies as the inevitable fall out of short-term measures to keep businesses afloat. These triggers have significantly impacted market sentiments, and Nifty could touch 15800-16000 levels in the short to medium term. An investor would look for safe options amid looming uncertainties at this juncture. Notwithstanding the possibility of any further correction, there is no reason to counter the time-tested logic of staying invested amid the short market volatility.

GST collections are stable, and the tax collections from listed companies have been on the rise. Consumption is now getting back at pre-Covid levels, which will lend momentum to the capex cycle. The budget has been largely pro-growth given the absence of any fresh negatives. Infra spending is likely to go up going forward. The real GDP expectations are in the region of 8-9 per cent. Inflation should settle in the long run, whereas the low borrowings rate is a necessary breather. Talking of taper tantrums, last time there was an interest rate hike, Indian equities rallied, so undue fear around taper tantrums is unfounded. Clearly, the market remains structurally positive for the long term, and this belief stems from fundamental factors and not speculative takes.    

Where do you see the opportunities in 2022 for long-term investors? 

As we are heading towards a 5 trillion-dollar economy, the biggest beneficiary would be the corporate sector, which augurs well for long-term investors. Out of 500 listed companies, 300 have fetched approximately 18 per cent margins on average. So, the growth narrative rests on a firm foundation. Having said that, the key factor for investors will be the ability to envision and make sense of the future business ecosystem quickly and accurately identifying which companies adopt the best-suited models in line with the evolving business environment and the changing transaction and consumption behaviours of the millennials and Gen Z population. 

Quality research will play a significant role in selecting the right stocks and ensuing handsome returns on the overall portfolio. Staying invested with a long-term perspective is the most prudent option, provided the portfolio comprises fundamentally sound picks. To make any fresh buys on dips, it is advisable to focus on a stock-specific approach backed by strong research rather than be swayed by the surrounding hype and noise. SIP in stocks is also a good option to build a quality long-term portfolio.