‘The regulators should be congratulated for having managed the system well’

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: Apart from the investors who take the biggest hit in terms of capital erosion in times of a meltdown, the broking community also suffers. There have been similar meltdowns that have happened in the past and each time there was a scam or a payment crisis of sorts that was created. However, this time around, while things look bleak, we have not witnessed any payment crisis and winding up of operations as yet. Dharmesh Mehta, head, stock broking with Enam Securities, one of India’s prestigious broking firms, in an interview with Akash Joshi of The Financial Express spoke about some of the reasons for this. He also threw light on how the market situation could improve. Some excerpts.

In these current testing times, what has been the impact on the broking community and how are people gearing up to meet the challenge?

There are good times and there are bad times, it’s a cyclical business. If you look at the past five years, say from 2003 onwards, the times have been good. In fact, they were fabulous for the business. So if people have been in the business for these years, I think they will have enough to tide over the next two or three years of tough times, if at all the tough times last that long. Moreover, if you see the volumes, they have not collapsed so much, and there is volatility. So because of the volatility there is business. The day the volatility goes away and the volumes drop, then the situation will really be bad. Now, on the second aspect of your question, as to how businesses are gearing up to face the challenges, let me put things in perspective. There are two sets of brokers, one is institutional and the other is the retail broker. For retail brokers there will be a cut down in the extent of operations, maybe employees and other fancy services. Already the volumes in the retail segment are down and they will not be able to bear the costs. For institutional brokers, the volumes are still okay.

One of the things we have seen, especially in India, is that this time when the markets have crashed, there has been no crisis as such. In the previous crashes, one could usually see payment crises all around. What could you attribute this to?