Broking industry revenues could be healthy in FY24, says Dhiraj Relli

The run up in the Indian markets since their March 2023 lows has been mostly led by foreign investor flows. DHIRAJ RELLI, MD & CEO, HDFC Securities, tells Puneet Wadhwa in an email interview that FIIs could broadly remain bullish on Indian equities given the fact that India remains a bright spot among emerging economies. Edited excerpts:
 

How do you see FY24 playing out for the broking industry?

After a subdued April 2023, trading volumes have remained healthy. Foreign portfolio investor (FPI) flow-driven market rally has attracted local traders and investors and action has spread to broader markets. F&O volumes continue to touch new highs. With state and central elections due over the next two-three quarters, markets will not be short of expectations and triggers – both positive and negative. This could keep driving volumes with some lull for a couple of weeks thrown in between. As trading volumes are likely to be firm, broking industry revenues could be healthy in fiscal 2023-24 (FY24), even as the yields may not have much further to fall.

HDFC Securities had plans to launch a discount broking / fintech platform. Where are we on this?

While the new Fintech platform will largely cater to do-it-yourself (DIY) traders/investors who need minimal support and offer flat brokerage rates, the traditional full service platform (InvestRight) will continue to provide curated plans for various types of investors along with managed services. We will be able to provide market participants an ecosystem of their choice.

Will the discount brokers be able to sustain operations as costs rise?

The key to success in this space is volumes and its mix and market share. Though technology and compliance costs are on the rise. Once the infrastructure is in place, additional volumes could straightaway result in higher bottom-line as the costs are largely fixed. HDFC Securities, with its brand, parentage, tech expertise, and experience over the past 23 years, aims to be a leader in the broking space in a matter of a couple of years. Robust technology, simple plans and convenient 3-in-1 account will help it achieve scale soon.

Are investors warming up to the primary markets now after the run up seen in the secondary markets?

IPO markets have seen some recovery in this fiscal though we are yet to see a flood of large sized IPOs. Investors in recent IPOs have made money and seem keen to participate in future IPOs that are not too aggressively priced. That said, Indian markets, over the past few months, have been catching up its earlier relative underperformance aided by flows. With a lot of triggers ahead of us and rising participation, markets could remain firm with occasional corrections thrown in between.

While in terms of valuation, on a historical comparison basis, Indian markets don’t seem cheap, a lot of transformation has happened at the macro and micro level over the past few years that necessitates relooking at the traditional methods of valuation especially because interest rates globally seem to be peaking out. That said, in case the El Nino pattern plays out negatively and/or the political situation becomes messy, we may see markets correcting and waiting for the situation to become clear by early/ mid-2024.

 

What's the road ahead for FII flows into Indian equities?
 

FIIs could broadly remain bullish on Indian equities given the fact that India remains a bright spot among emerging economies (with China struggling to regain economic momentum). Some correction in the markets may, however, be due and FPIs may book some profit post markets seeing a straight rise. Political nervousness ahead of the elections in states and Centre could also result in some profit taking by both the FIIs and local investors.