The Hindu Business Line : Crash will hit retail interest in equities, say brokers

"It is a systemic problem and we are part of the system. As such, earnings will take a hit," said the head of a leading domestic broking house, on condition of anonymity.

According to the senior officials of brokerages with large retail client base, the overall volume of retail participation will drop at least 10 per cent, thereby affecting earnings.

"The euphoria had created income. This crash will affect earnings in that there will be a temporary lull before there is large-scale retail participation again," the head of a reputed broking house said.

According to Mr Vallabh Bhansali, Chairman of the Enam Group, volatility and fluctuations are intrinsic to a vibrant market.

But there is the need to promote equity investor base in India, thereby reducing the dependency of the market on FII intervention.

On the factors precipitating the crash, he said: "The market had gone up too sharply. It was a combination of loss in appetite to hold speculative positions and an attempt to secure gains. In other words, the holding of these positions was untenable, so individuals were forced to sell cash shares to pare losses."

Otherwise, there is nothing that has shaken the confidence of the real investor.

"This is the best time to invest," said Mr Paresh Khandwala, Managing Director of Khandwala Securities. According to him, sectors that look good are cement, steel, and automobile. Referring to the crash, he said that the rally above 10,000 had started discounting 2007-08 earnings too fast. "Given the herd mentality, the market had gone hollow."

Mr Parag Parikh, Chairman of Parag Parikh Financial Advisory Services, said: "Over a period of one year, the index has gone up from 6,000 levels to 12,000 plus levels."

Much of the subsequent panic and decline was on account of retail investors turned punters.

"The futures and options segment had been over-leveraged given the greed of the market participants. However, bad times like these are good for the long-term investor."

Taking a pragmatic view, Mr Rajesh Jain, Managing Director of Pranav Securities, said that while it may be a good time to enter the market at these levels, waiting would be better.

"The key issue right now is whether a broker can get his client to pay up his losses and thereafter clear his obligations with the exchanges. Everything else is secondary."

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