The government’s new policies are heading in the right direction at least from the point of view of capital markets, said CJ George, Managing Director, Geojit Financial Services. “There are visible signs of large becoming larger in the corporate world helping the listed universe,” he told in an interaction with Businessline. George talks about on recent NSE technical glitch, competition, market outlook and other host of things.
Has the recent budget done enough for the economy?
This is the boldest budget we had in a long time and it seems like FM have used the crisis as an opportunity to push the ideas of markets and private capital for future growth in line with the economic philosophy of the ruling party. We can expect companies and sectors focused on domestic economy to do better due to rebound in business post the Covid lockdown and a growth focused budget.
How did you handle customers during the time of technical glitches in exchanges as seen recently in NSE. Whether it is impacting trading volumes?
Trading disruptions due to technical glitches are far too many these days either be at stock exchanges or at the depositories. The traders in the market were in for a major shock last week due to the disruption in trading in NSE due to technical glitches as there was no clue about what was happening due to lack of communication.
We were not able to effectively communicate with clients, but we did update them about the status throughout the downtime. Most important at times of trading disruption is active communication between exchanges and members on the one hand and between members and clients on the other hand. For once interoperability came as a rescue in cash segment for brokers and clients as there was no communication regarding re-opening.
Thanks to the vibrancy of the markets, the trading volumes are intact at the moment. But repeated instances will affect the trust in the system and the volumes too.
What are the reasons for the markets to go up continuously?
We have seen robust buying by FIIs driven by global liquidity and this has triggered a strong rally leading to higher inflows to EMs. India has an advantage as we are witnessing a simultaneous rebound in the economy backed by announcement of structural reforms. Market trend is also supported by a surge in investment by retail and domestic non-institutional investors (Non MF).
We can foresee excellent revival in business and growth in market share for listed universe and this can lead to a sharp upgrades in future earnings growth.
Will you encourage new investors to come in at this level?
Yes, because the Indian economy is on a growth trajectory. This is a buy-on-dips market and the long-term trend is positive. In the near-term we can expect some consolidation given solid gains made during the last three quarters. So, instead of choosing lump sum investment options, I would suggest value buying and systematic investments (SIP) in direct equity and MF.
What sectors would you recommend for investment?
Our house view is that IT, healthcare and chemical sectors are on a strong foothold although these are already discounted. They may be expensive on a near-term basis, but further re-rating is highly possible. So, step-by-step buying is suggested to develop a good allocation in the portfolio.
Cyclical, Industrial, Infra, Consumption and Metals are suggested on a short to medium-term basis due to strong demand foreseen in the future and the upside in commodity prices will trigger good earnings growth in the next one to two years.
Broking firms are increasingly using Artificial Intelligence to identify promising stocks. Will this be a game-changer for the stock markets?
Yes, definitely. As there is no human bias in the selection process, investors can be confident that the rule/discipline-based stock selection is the underlying process behind the advice they are receiving. There are now many platforms that use AI and at Geojit, the global investments carried out through Stockal platform also use AI for guidance.
In our Smartfolios platform also, we have AI-based stock selection process. So AI is here to stay and more applications and products will be developed in the fintech space.
How has the popularity of discount brokers affected Geojit? Have you seen a trend of clients moving to discount brokers?
Yes, discount brokers are attracting the attention of traders more than investors. With Covid lockdown this trend of gambling without much research or study is on the rise.
As for investors, I feel that those who really have set goals and want to create wealth in the long term should look to guidance and support. And this is one area Geojit specialises in as we have a strong client advisory experience resulting in our best ever 9 month’s results during the April to December period of 20/21.
Interview first appeared in The Hindu Business Line.