Digitisation and intelligent automation of processes — which were accelerated in the trading platform in the pandemic period – has become a practice and it will be a continuous improvement programme. The customers’ demand for new experiences and convenience will continue to drive innovation, says A Balakrishnan, Executive Director of Geojit Financial Services. With the implementation of the new regulatory framework, we will be witnessing the emergence of intelligent platforms, he said when asked on the new trends expected in the current year.
Excerpts from the interaction:
Do you see the increased number of demat accounts created during the past few years, especially during the pandemic period, actually translated into active trading? Is there a significant jump in the customer base of Geojit after the pandemic?
Certainly, we have seen a steady increase in new accounts. But new gen traders started using derivative platforms during the pandemic period without understanding the complexities of the products. They were driven by hearsay benefits of trading, and many burnt their fingers.
The recent SEBI report on how retail investors lost money in the F&O market gives us evidence on the effects of the surge in retail market participation. Most importantly, it is our job to create awareness on investments. By and large, our focus is on investing and not ‘trading’.
As per the latest SEBI study, 89 per cent of individual traders suffered losses in the equity F&O segment. What is your take on F&O trading?
For derivative trading, fundamentally and technically you need to have thorough knowledge on the product and related risks. If you jump into derivative trading without any knowledge, then occurring loss is a natural process. Very often retail customers play into derivative products like gambling and hence make huge losses. It is not a new thing. It has been the situation for a long time.
Now, the numbers are at a very large scale because the recently enrolled clients and the majority of the existing ones are only trading in these instruments. To even trade in the derivative segment, one has to do a lot of homework, they have to study the product market and then trade accordingly.
NSE has allowed trading in interest rate derivatives till 5 pm, what is your view?
In today’s world, economies are highly connected and the integration of the global markets is gradually increasing. The Indian stock market reacts to the developments in major economies and markets in the US and Europe.
Therefore, markets which have longer trading hours can help in hedging the risk arising due to the global information flow in a more efficient way. Therefore, any move by NSE to increase the trading time for the equity segment will help the market participants.
How do you see the IPO market in 2023? Is the IPO market still attractive for the retail investors especially after many much-touted companies’ shares are now trading below the listing price?
There were successful IPOs that gave investors reasonably good returns. Our research team does a proper study on the company before recommending its IPO to our clients. IPOs of fifty-four companies (eyeing more than ₹84,000 crore) are in the pipeline.
Nowadays, retail investors rush to invest in IPOs without any in-depth research. With the prevailing market and global economic conditions, investors should take decisions only after adequate research and analysis.
Will it not impact cost of operations for brokerages?
Extended trading hours may increase the operation costs for want of additional resources such as personnel, technology, and infrastructure. This may require staff to work in shifts, resulting in an increased labour costs. However, optimisation of processes using technology can help minimise the impact on costs and backlog work. Collaboration and communication among market participants are critical for a smooth transition to extended trading hours. Ultimately, the success of extended trading hours will depend on the ability of market participants to work together and leverage technology to improve efficiency and reduce costs.
First Published in The Hindu Businessline