It Makes Sense To Target The Retail Investor
Business Standard: The Indian broking community is wilting under the onslaught of the foreign broking houses. Is it a temporary phenomenon or has the situation reached a point of no return?
Pashupati Advani: Yes, I do agree that by and large, individual brokers are going through a lean patch at the moment. With newer foreign funds entering the Indian market every month, the Indian broker is rapidly losing out on business. The foreign funds are more comfortable in dealing through FII broking houses which have a global presence. But I do not feel that the situation has reached a point of no return. Things should improve once the BOLT expansion comes into effect. The individual broker will be able to reach out to the small investor better than the large broking houses.
Under such circumstances it would make better sense for the individual brokers to operate on behalf of the larger broking houses on a commission basis. This would help them to reduce their operating costs, which eats away into their meagre profits. But this time, the broker cant take the small investor for granted as was the case in the past. From now on, it will be the survival of the fittest. The broker who provides the most efficient business will stay while the others will have to pack their bags.
BS: Despite a lot of FII funds flowing into the markets in the last two weeks, only the index scrips seem to be reaping the benefits. The B1 scrips seem to have been left in the cold.
PA: Indian blue chips are a good bargain even at these levels, considering their earnings potential. With the Dow Jones Index overheated at the moment, Hong Kong becoming a part of China shortly and the limitations on the number of good scrips in the Russian market, there will be a sustained flow of funds in the Indian markets in the days to come.
Once the FII ceiling is reached in these scrips, the action will automatically shift to the B group stocks.
Also, UTI has stopped selling aggressively now that its redemptions demands have been met. It has already started reshuffling its portfolio by disposing off dud stocks and replacing them with quality B1 scrips.
With the BOLT expansion on anvil, the B group counters should witness activity in the coming days.
BS: Do you feel that the petro price will affect the corporate performance in the first half of the current fiscal ?
PA: The petro price hike will marginally affect corporate profits as most of the damage will be undone by the lower tax and interest rates.
Things will not be as bad as the previous fiscal when the economic slowdown
took a heavy toll on corporate performance.
The petro hike has already been factored in by the stock markets, so there wont be any major reaction on that front.
BS: Which sectors, apart from software and banking, do you see performing well in the coming months?
PA: With the oil price hike just a matter of time, petroleum stocks should fare well in the coming months.
Once the refineries receive their outstanding dues from the government, bottomlines of these companies will definitely improve which will be reflected in their stock prices.
With the economy poised for a turnaround, fast moving consumer goods will be the other sector which will perform well.