Online brokers alone can't serve new retail investors: Religare Broking CEO

We have launched an aggressive discount broking plan, Religare One Pro Plan, to counter the discount broker model and attract Gen Z and millennial clients, says Nitin Aggarwal

The Covid-19 pandemic gave a fillip to online discount brokerage firms as retail investors thronged these platforms post the 2020 market crash. Against this backdrop, NITIN AGGARWAL, Group CFO Religare Enterprises and CEO, Religare Broking tells Harshita Singh that online discount brokers alone can’t serve India’s young investors. Edited excerpts:

Have rate hike concerns been completely factored in by markets? What is your outlook for the remaining months of 2022?

Central banks have stated that controlling inflation is their top priority. Thus, markets have factored in at least a 100 basis points (bps) hike from the US Fed and 25-50 bps from the RBI in the coming months. With inflation already showing signs of cooling off, markets are now more concerned about growth, especially in the US. India is in a sweet spot amid the return of foreign flows, falling crude prices, and resilience of rupee among peers. Earnings have also been moderately positive and the market is outperforming. Valuations are not cheap but the market may command a premium for its growth visibility. We remain positive on equities.

How is the retail investor participation playing out currently as volatility seems to have re-appeared?

Despite concerns over inflation and global slowdown, Indian markets have been resilient with positive retail participation and robust macros. Retail participation in equities has demonstrated the long-term confidence that domestic investors have in the Indian economy.

We know that Indian households have low investments in equity as an asset class. Retail investors prefer equity-linked products when volatility has been positive, and we are definitely seeing aggressive investors in Indian markets who understand that the best time to buy is when everyone is selling.

How has Religare performed on the new customer acquisition front? How many of your total accounts are active traders?

We have seen a 45 per cent rise in new client acquisition in FY22, which is in line with the increase in new demat accounts in the industry. In terms of active clients, we have grown 22 per cent from last year and are now eyeing a growth of 30 per cent in FY23. Of our total unique active accounts, 60-70 per cent are active traders.

What are your strategies to defend market share amid a steady rise in online discount brokers?

We have customer-friendly offerings, including a wide range of products, services, and brokerage plans to cater to a hugely diverse consumer base. We have launched an aggressive discount broking plan, Religare One Pro Plan, to counter the discount broker model and attract Gen Z and millennial clients. Our clients get a comprehensive suite of traditional as well as discount broking services. Each user has access to a host of resources such as latest research reports, real-time investment calls, and market updates on our Dynami app.

Recently, we have also employed artificial intelligence and augmented voice intelligence systems to share instant and personalised investment opportunities, advisory services and research ideas via bots through phone calls. The customers can enquire about the rationale of the investment idea, investment horizon and expected returns prior to making informed decisions. We are also focussing to increase the reach and penetration of our franchise model with a fourfold increase in our business partner network.

How do you think traditional brokerages should be stepping up against this backdrop?

Most online discount brokers operate and acquire large customers on a cash burn model to target fast growth. We believe investors should choose broking partners for their comprehensive packages. Discount brokerage plans are not the only differentiator. 

Digital only is not the answer for India’s enormous new-to-market customer base. Investors need ‘phygital’ solutions, where they can choose digital, physical or a combination of both. Traditional brokers with robust research and advisory professionals have the capacity to combine discount broking model to serve customers in their preferred mode.

What investment strategy would you recommend at the current juncture?

Our strategy is to remain invested in equities. We have been contemplating that India should get a higher share of fund allocation compared to the recent past. It would be prudent not to have a blanket approach and give due consideration to deploy money where both growth and valuation comfort exist together.

Your overweight and underweight sectors?

Post-2020 correction, IT, metals and selected heavyweights have led the rally, which are now facing headwinds. We remain underweight in them. However, we see a mix of growth and valuation comfort in banking, automobile, and consumer durables, and suggest higher allocation in these sectors.