Retail trading volumes may bolster momentum: Centrum Broking's S Nayak

Centrum GalaxC will leverage Centrum Group's expertise in wealth management, insurance, and banking to provide schemes for wealth growth, management, savings, and security, said Nayak

The market’s momentum seems to have hit a roadblock amid multiple headwinds. SANDEEP NAYAK, chief executive officer for retail at Centrum GalaxC will leverage Centrum Group’s expertise in wealth management, insurance, and banking to provide schemes for wealth growth, management, savings, and security, tells Puneet Wadhwa in a phone conversation that although individual investors have regularly booked profits thus far in 2023–24 (FY24), they have still maintained their long-term systematic investment plans (SIPs), signalling signs of maturity and the ability to manage volatility. Edited excerpts:

How do you see fortunes playing out for the broking industry in the remaining part of FY24? Do you anticipate retail volumes to thin amid market headwinds? 
 

The first four months of FY24 have witnessed a 15.6 per cent year-on-year (Y-o-Y) surge in cash market volumes and a 6.1 per cent Y-o-Y growth in futures and options (F&O) market volumes. This trend is expected to persist for the remaining months as well, attributed to India’s robust economic performance amidst global challenges.

While individual investors have consistently booked profits in FY24, they have also maintained their long-term SIPs, indicating signs of maturity and effective management of volatility.

With nearly 10 million active investors in the cash market and around 4 million in the F&O market, retail trading volumes are likely to bolster the existing market momentum.

Moreover, historical data suggests that trading volumes are at their peak six months before a general election.

How significant is digital/mobile print for your brokerage? What are your expansion plans? 
 

We are introducing our digital proposition, Centrum GalaxC, which is a comprehensive digital financial platform designed around a do-it-yourself engine encompassing various investment asset classes. This platform is targeted at the digitally savvy Generation Y and Generation Z.

Centrum GalaxC will leverage Centrum Group’s expertise in wealth management, insurance, and banking to provide schemes for wealth growth, management, savings, and security. It will also offer a 3-in-1 proposition to seamlessly transfer funds between trading, dematerialised, and bank accounts.

Do you believe that the Indian financial infrastructure has the muscle to support the trading date (T-date) settlement framework? 
 

The introduction of a T-date settlement could be a game-changing move and appears to be heading in the right direction. The domestic payment infrastructure in the country, including the Immediate Payment Service, National Electronic Funds Transfer, Real-Time Gross Settlement, and Unified Payments Interface, is considered among the best globally.

While implementing domestic trades should not pose significant challenges, enhancing the infrastructure for the international movement of money and remittances by custodians working for foreign portfolio investors is necessary to facilitate same-day settlements while adhering to the Foreign Exchange Regulation Act and Foreign Exchange Management Act laws.

Once this infrastructure is strengthened, achieving a T-date settlement could become a reality within 12–18 months.

Have your institutional clients become more cautious regarding the Indian markets? 
 

Global markets are grappling with the escalation of US bond yields to multi-year highs. The earlier market anticipation that US rates had peaked and would transition from near-zero to over 5 per cent has not been substantiated by statements from the US Federal Reserve (Fed).

The Fed initially underestimated inflation’s persistence as ‘transitory’, leading to a delayed adjustment of interest rates. The Fed has now adopted a highly cautious and data-driven approach, refraining from providing forward guidance on the interest-rate trajectory, thereby unsettling the markets.

Persistently deteriorating economic prospects in China are also contributing to global volatility. In the short term, this sentiment could impact Indian markets, prompting many discerning institutional clients to adopt a wait-and-watch stance.

Are valuations posing a challenge? 
 

The earnings season for the National Stock Exchange Nifty companies in the April-June quarter of FY24 demonstrated robust growth. The anticipated earnings growth of 15–18 per cent compound annual growth rate over the next two years further emboldens market sentiment.

With a valuation of under 20x in 2024–25 and a price/earnings-to-growth ratio of 1.3x, the Indian market remains an attractive value proposition.

Did the markets run ahead of fundamentals in the past few months? 
 

Following the pandemic, India’s economic rebound has been remarkable, evident in over 6 per cent headline growth, record goods and services tax collections, and strong direct tax revenues. However, inflation above 7 per cent remains a concern, coupled with a monsoon slowdown in early August.

Yet, recognising India’s favourable position in the global context — including a weakened Chinese economy — reinforces its structural strength.

A prudent approach that overlooks transient sentiment suggests the potential for continued strong inflows into India and upward market movement remains considerable.

Do retail investors now have firm faith in the primary markets after a period of low activity? 
 

The primary issue by Life Insurance Corporation of India last year attracted a large number of first-time investors to the market. Such landmark initial public offerings (IPOs) broaden the investor base.

The buoyancy of the secondary market consistently primes the primary market, and the pace of IPOs should increase in the second half of the current financial year (FY24).

The Securities and Exchange Board of India has announced a plan to reduce the listing time from six days to three days after the IPO closes, starting in December. This move is expected to invigorate the primary market going forward.