'Investors are better informed and more demanding now'

, one of the leading equity research and broking houses in the country, is known for its strong belief in value-investing. MOSt provides end-to-end equity solutions to its institutional and individual clients.

For the third consecutive year, Asia Money Broker's Poll 2003 has rated MOSt as one of the best Indian broking houses for research. Business Standard spoke to Motilal Oswal, chairman & managing director, MOSt, on the fast changing and evolving equity broking business and his latest entry into commodities broking.

Motilal Oswal had been elected as a director of BSE and joined its governing board in 1998. He is currently a member of various committees of CDSIL and Sebi.

How has the investor profile changed in the last few years? Are investors more informed now?

The quality of investors has also improved in sync with the market. They are now looking for quality stocks, unlike in earlier times when they blindly followed trends. The investor is much more informed, knowledgeable and demanding. They are realising that it is important to take a long-term view of the market and average holding period of an investor is going up.

We categorise the investor universe broadly into three types: the self-motivated investor who takes his own investment decisions, the validator who typically comes for investor advice but takes his own decisions, and finally the delegator, who typically lets the expert take the decisions and invest for him. We prefer catering to the latter two groups.

Are brokerage houses geared to service the new investor?

Today, the retail and institutional investors expect much more from a broker than just the execution of trades. Brokerage as a business model is changing to cater to this. Technology is being increasingly used and value added services are being offered under one roof.

We offer products like e-broking, derivatives, depository services, portfolio management services, research and, now, commodities. Research, in fact, is one of the most important services.

Why the emphasis on research?

Investors are looking for more value addition than just plain vanilla trading. Research plays an important role in taking an educated view of the markets. Investors are much more aware and want good quality advice before investing. We have a full-fledged team of research analysts doing equity research on most companies and sectors.

They analyse the Indian economy and corporate sectors to identify equity investment ideas. In fact, 15-20 per cent of our revenues are spent on research activities.

Consistent delivery of high quality reports on individual stocks, sector trends and investment strategy has established us as a competent and reliable research unit amongst leading foreign and domestic institutional investors. We believe in picking investment opportunities where the underlying value is higher than the market price.

Why the need to have a portfolio management scheme?

PMS is a specially designed product to cater to the needs of investors who are comfortable with high risk but do not have the time, updated market information and analytic tools to manage their own trading.

We offer two PMS to suit the investor's risk appetite: Value PMS focuses on value investing. For those with an aggressive appetite to the markets, we offer the Trading PMS. The focus here is to take active positions based on price momentum and trends. The downside risk is managed through a disciplined and systematic approach supported by latest technology tools.

Are brokerages moving towards a fee-based business model?

Broking is the primary business and broking fees still makes the biggest chunk of revenues for a brokerage house. Increasingly though, we are seeing a gradual movement towards a fee based business model.

Brokerages abroad tend get 60-70 per cent of their revenues through fees, while in India it is still a very small amount. We still earn about 80 per cent of our revenues through brokerage.

Why have you introduced web-trading in commodities?

We have just launched commodities broking on the web, which makes us the only player in India offering this facility. Those investors who are already trading in commodities, and have certain level of comfort with this new instrument, will find web trading in commodities a major boon.

Besides, our company will bring in-depth research on each and every commodity segment to help clients take informed investment decisions.

What synergy do you see in your equity brokerage business and commodities broking?

Commodities is one more product that will be offered through our strong distribution channel of more than 180 outlets spread across more than 120 cities in 20 states across the country. We have the technology platform to service this huge customer base, though initially the market will mainly comprise traders/wholesalers who will help develop it, followed by retail.