The Hindu Business Line : Huge population of retail investors is vital

THOSE who dabble in the equity markets are increasingly realising that stocks - at least a large number of them - are not cheap any more, feels Mr Parag Shah, Director, Brics Securities. The latter is the outfit that emerged after Birla Sunlife Securities was taken over by the JV Gokal group, the tea and commodities trading specialists, in late 2003.

Mr Shah, however, adds that value is often unlocked in the most unexpected ways.

Excerpts:

Would you say that equity prices are too stretched?

For the committed investor, one who is not in the market to make short-term gains, there may well be more positive surprises. That said, let me point out that many stocks are trading near their 52-week highs. Some have moved ahead very rapidly within a short span. That gives rise to mixed feelings.

Ultimately, sooner than later, the equity market will reward good stock-selection strategies. What also needs to be factored in now is the inflow of funds from abroad. That has given an impetus to what is popularly called the `India story'.

Some time ago, we heard about Japanese institutions investing in Indian stocks. Then South Koreans too... My point is this should augur well for even domestic investors.

But over-dependence on such hot money is risky, isn't it?

We need strong domestic institutions, those that will understand the nitty-gritty of the local market. Also, a solid retail base will help our case. A huge population of retail investors is vital. The good thing is that retail is picking up. An investment culture, embracing equities and other asset classes, is firmly established today.

Are stockbrokers here equipped to handle the zeal expressed by the investor community?

Broking firms are changing tack to handle the increased volumes. Today, you have brokers operating from newer locations. Even smaller centres are providing good business - better than what was before.

At the lower end, there is considerable interest. People today realise the importance of saving and investing properly in order to create wealth. As for larger investors, check out the PMS scene. There are more options for HNIs than ever before.

What are your own expansion plans?

At Brics Securities, we have proposed to enter new territories by widening our network of offices. There are also plans to offer PMS, for which we have SEBI's approval. That, we feel, will be an extension of our present business. The idea is to create a strong wealth management enterprise.

As I indicated earlier, PMS is a growing domain, one that is attracting new players.

Our other efforts on the fixed-income side will continue.

On the debt front, we currently cater to corporate retirement trusts in a big way and help clients maintain statutory investment patterns. There are plans to spearhead commodities broking business too.

Are ordinary investors again becoming interested in fixed-income products, say, debt funds?

Options such as GOI bonds have a certain appeal for some sections. This is reflected in the kind of money that such instruments, postal savings included, attract.

But investors did feel disappointed by the returns that some debt funds have provided till recently. That was evident from the visible withdrawals - money was simply moving out to alternative avenues.

In the debt market, several factors, including increase in US rates and higher credit offtake domestically, will play key roles in the days ahead.

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