New-age discount brokerage firms are not likely to face any disruption even as traditional firms adapt their business model and attempt to gain market share helped by their deep pockets, said Tejas Khoday, Co-founder and CEO, FYERS in an interview with Kshitij Bhargava of FinancialExpress.com. Tejas Khoday believes investors are now looking at services rather than the price that a brokerage offers. The CEO of Bengaluru-based FYERS shed light on the recent trends in Demat account openings and shares his views on where stock markets are headed. Here are the edited excerpts.
How has the pace of Demat Account opening been in the last few months?
The pace is kind of steady I would say, not as great as it was in 2021 after the market topped last year. The growth has kind of slowed down but there’s steady growth. Not like we are experiencing any month-on-month growth as such, but it’s not gone into de-growth, I’d say the rate has just slowed a little bit. Also, the kind of customers that we have are mostly active traders and investors. So we are more niche in that sense. So we haven’t experienced the same slowdown that maybe many other brokerages may have.
What primarily, in your view, is the reason for this slowdown?
Well, the markets have come off a bit for one. So the participation went up because of lockdown investing essentially. That was when everybody came in and then we saw a bull run and then as stock markets started coming off the new traders thought this may not be the right time or the right place to be. So I would say it’s a temporary hands-off feeling in the crowd and maybe they will jump back in again in the future. But, it doesn’t look like it’s the end.
Some big-name brokerage houses with deep pockets have cut prices, do you believe they could disrupt the market for the new age discount brokerages?
ICICI has been in the discount broking space for a while. Kotak has been there for a few years and AXIS has been there for a few years as well. This is already happening. When they first launched there were jitters among discount brokers. But the way it has played out is that investors and traders now value offerings more than just the brand value of a bank so to speak. So the customer preferences are shifting. They prefer to deal with brokerages or platforms that can give them what they want. So it’s no longer about pricing you know — the pricing is done and dusted. The reason it’s done and dusted is that the cost of doing business has shot up significantly over the last six to seven years and it’s become very tech-intensive and not a lot of brokers are able to fill that requirement. There are already brokerages that allow trading for free and most of the other services that discount brokerages offer it is more or less free anyways. So there’s not really much to disrupt there that happened many years ago. So now it’s more about what can you do for your target audience rather than at what rate you can do it for. Because that’s no longer exciting.
We have also seen that the pace at which IPOs were coming in has slowed down. Do you think that has also contributed to a drop in account openings?
Absolutely, it’s because I think both LIC and Paytm failed and all the other IPOs that came out (including Zomato and PB Fintech (Policybazar) and got listed have only gone down. Even if you see the BSE IPO index it’s just not inspiring any confidence.
I still remember when I first started investing in the peak of 2006-2007. People made money in the infrastructure IPOs – any IPOs but particularly infra IPOs/real estate IPOs. If you get an allotment then you would probably double your money. But that really didn’t happen this time around. That’s because peak valuations were already mostly priced into the issue price itself. So I would say the companies didn’t leave anything on the table. So as soon as the issue went public it was downhill from there on and I think that has dented people’s confidence.
Do you think that if big-name IPOs such as GoAir, OYO come now, investors will dive back in?
Investors have burned their hands so it’s natural for people to become careful now. So that’s going to happen. I don’t think there will be any euphoria if other unicorns go public because they are going to always benchmark it against your Paytm and Zomato. So if Swiggy goes public, which I don’t think it will, or if any other IPOs come out from the startup space, I don’t think it’s going to contribute to bringing back retail investors in the market. I think retail investors will now come back to the markets if the Nifty breaks the previous high of 18000. When that happens you’ll see a new surge in new account openings number one and you’ll see a lot of trading participation. Up until then, it’s going to be consolidation. When I say consolidation — consolidation of trading activity amidst a few fintech brokers and such.
What is the growth outlook for FYERS? Where do you see the company heading in the next coming year or two?
So we are diversifying our offerings beginning with the launch of our NRI trading service, which we just launched. What this is about is — NRIs are a neglected target audience in India. Most of them who invest in India have to go through a lot of paperwork and when they do come to India they are not really handheld in that sense. What we’re trying to do is make life easier for NRIs to trade and invest in India and so that’s our focus area for the rest of this year.
Where do you think the market is heading right now?
The market is heading in only one direction and that is up. But it’s already gone up a lot and so there’s going to be a period of consolidation because of all this macro stuff that’s happening rate hikes across the world, inflation that is inevitable, geopolitical tensions will, I think play out over the next two years from a stock market standpoint. SIP flows have held strong and they were able to absorb consistent FII selling. So that’s something that’s not going to stop and it’s likely to increase over a period of time. So when FIIs finally come back into the markets, SIPs will continue and plus foreign funds buying is going to send the stock market through the roof. I can’t put a timeline to it. But eventually, I think more money will come into the markets and that is inevitable.