Broking business should focus on getting platforms robust and self-reliant, says Prakarsh Gagdani of 5paisa.com

Updated : May 12, 2020 04:13 PM IST

Speaking to CNBCTV18.com, Prakarsh Gagdani talked about the broking business and interest of investors in the time of COVID-19 crisis.

The recent fall in the equity market due to the coronavirus pandemic has seen new investors pump in more money, while brokers are focussing on getting robust and self-reliant on their platforms, said Prakarsh Gagdani, CEO of 5paisa.com.

Speaking to CNBCTV18.com, Gagdani talked about the broking business and interest of investors in the time of COVID-19 crisis, which has had a serious impact on markets.

Here are edited experts from the interview.

Q: It must be testing times for investors, particularly equity investors and it surely has had a negative influence on the broking sector. Please explain the current scenario and the consequences on businesses?

Gagdani: The current scenario has a different influence on different people. For an existing investor, these are terrible times. Stocks are down by 30-50 percent and that too after a flat to negative return. However, we see that most of investors are investing more money for averaging or buying other stocks rather than selling and getting out. For a new client or a first-time investor, the present situation is a huge opportunity. We are seeing unprecedented pull towards equity buying from these new customers. So both these category of investors are differently influenced by markets.

Q: What strategies or steps you think the brokerage firms should adopt to remain relevant in these tough times?

Gagdani: I think it is proven beyond doubt that Online and DIY are the way to go in this business. So, firms realizing this only has the chance of survival and growth. Brokerage firms should focus on getting their platform and product robust and self-reliance.

Q: With markets becoming extremely volatile recently, what has been your experience when it comes to interest from retail customers?

Gagdani: Volatility is a traders’ delight and the volatility we are now witnessing is something we have not seen in long time. There is a huge interest from retail investors. But the maximum interest is from the new investors who are very active now and are investing heavily for bottom fishing.

Q: What about existing customers? We have seen this trend where over the past several years, investors try to learn trading/investing on their own instead of relying on tips and advice.

Gagdani: This is very interesting. New investors are doing a lot of research themselves online to learn about markets. This is evident from the views we get on YouTube channel where we get approx. 2.5 million monthly views on our market related video. However, a lot of customers still rely on advice even after self-learning. Though I won’t be able to say about unsolicited advice but for us we see a huge increase of customers relying on our advisory products. In both cases, though customers want to execute the transaction themselves rather than relying on some relationship manager.

Q: Can you share some data on how retail investors are faring? The average holding period, mix between short-term traders and long-term investors, success ratio, churn, customers who have stopped investing etc?

Gagdani: With the dynamic nature of our stock markets, it is difficult to generalize holding period for customers especially for the last 2 years where mostly indices are rangebound to negative. So looking at returns retail investors are making, the holding period has increased. As 80 percent of our customers are investors and not Derivatives traders. Among investors, more than 60 percent are long term investors and their average holding period is high. Secondly, we are in business for just last 4 years and most of our customer acquisition is in the last 2 years. This is why almost 75 - 80 percent of our customer base is active and trading.

Q: How the regulatory changes have altered your business model?

Gagdani: Year 2019 can be marked as year of major regulatory changes for Indian Capital Markets. Most of the changes were because of frauds like Karvy, BMA wealth, etc. Overall, I am really satisfied that the changes brought by regulators have strengthened capital markets for good. Higher capital requirements, stringent reporting norms and frequent audits by regulators have created a much-needed entry barrier for weaker players.

Q: Are people still finding simple ‘buy and hold equity’ a best traditional mode of investment encouraging?

Gagdani: Absolutely. Equities have always given good returns in long term. Short Term trading is exciting and thrilling but remember, Thrill kills. So, the best way is to invest for a 3-5 year period and do not see your stocks every day.

Q: What measures have you taken to educate investors about risk related to equity markets?

Gagdani: There are several measures we took in last couple of years. It started by educating clients about capital markets through our Youtube channel. Our channel has more than 1 lakh subscribers, one of the highest in industry. Secondly, we promote investing either through SIP route of Mutual fund or basket investing through our product small case. Both options are pitched to customers when they open an account with us especially first-time investors. Lastly, we regularly do webinars with industry experts on various topics about equity as an asset class.

Published : May 12, 2020 04:09 PM IST

Broking business should focus on getting platforms robust and self-reliant, says Prakarsh Gagdani of 5paisa.com

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