Mr E. Prasanth Prabhakaran, Senior Vice-President and All-India Head, Online Division, Kotak Securities

With the Net-savvy citizens on the rise, it comes as no surprise that the Indian investors and traders now prefer to punch in their orders directly on the online trading platform. But if you thought that these online traders were concentrated in the Metro cities then you would be wrong. For, Mr E. Prasanth Prabhakaran, Senior Vice-President and All-India Head, Online Division, Kotak Securities, tells Business Line that a small kirana shop owner in Balaso re could be just as eagerly keying in his trades on kotaksecurities.com.

Excerpts from the interview.

Do you see any pattern shifts in the profile of investors registering on Kotak Securities’ online trading platform?

The pattern continues to be the same as it was two to three years ago. Many of the investors coming into online broking space come in from the B and C category cities where access to a broker or a sub-broker is limited. These people like to deal directly with the online platform instead of routing their transaction through an intermediary who is present in their city.

Even now, around 40 to 45 per cent of the volumes in kotaksecurities.com originate from the B and C category cities. In the metros, or the A category cities, clients can easily walk into their brokers’ office and do business. Investors in smaller cities do not have this facility and so prefer trading through the Net. We also get many queries for opening online franchisee business from these locations.

Any particular city or State which is generating more business?

We have divided India into seven regions and the number of accounts from each of these regions is equal. We had six offices when we started refocusing on online trading in 2004. The number is now 180 and these offices are equally dispersed across the country. We probably have as many branches in Rajasthan as we do in Orissa. I cannot say that there has been a large inflow of clients from any particular belt. It has been equal and consistent over the last three to four years.

The A category cities still account for about 60 per cent of the business. But the ticket size would be much larger in these centres. The value of trade that takes place in Mumbai would be three to four times the size of a trade from a smaller city.

And how is the demographic spread? We hear about young investors trading in stocks…..

This is true in metro cities, where new investors register for online trading. But in the B and C category cities, investors are more seasoned. Some small scale industry owners who are Net-friendly, for example, a rice mill owner in Orissa, could be signing up. There are fewer shifts in metros from the practice of dealing with a main broker to online broking; but this trend is prominent in smaller cities.

What is the ratio of women in the online trading platform users?

That is difficult to ascertain since there are a number of professionals and businessmen who open accounts in their wives’ names. The person handling these accounts might be different from the ones in whose name the account is opened. This route might be adopted for tax purposes. It would be difficult, therefore, to arrive at the number of women who are actually trading on the Net.

How is Kotak Securities coping with the shrinking volumes on the Indian bourses?

The shrinking volumes give us the chance to build the business the way we want to. In a bull-run, we do not have the time to set up systems and procedures. And that is exactly what we are doing now. Our service cell has been strengthened from 30 to 100 members. We are also strengthening the back-office to be ready when the volumes expand in future.

The number of retail investors and the number of accounts that we register on the online platform have actually gone up in this period. From an average of 335 accounts, the number has gone up to 445 a month. These are accounts with margins. We only go after serious investors who are willing to put in ‘x’ amount of money to start off with as funding that account.

How do you see the broking business over the next few quarters?

The growth will be slow compared with this quarter (ended March 2008). It will continue in the same fashion for the next few quarters also. It is going to be a range-bound market. There are not too many positive triggers in the market at present.

The going has been rough these last four months. Over this period, we have been advising our clients to stay in cash as much as possible as it is very difficult to make money in such a volatile scenario. It is better to stay on the border-line, wait for the market to stabilise and then take a directional call. And we still have not advised our clients to re-enter the market in a full-fledged manner. We are advising them to invest their money in tranches, rather than all at one go.

So where do you see opportunities now?

The only sectors that can be touched are technology and infrastructure, since they can be relatively insulated from the economic slowdown. IT will benefit from rupee depreciation, notwithstanding the hedging that has taken place. Infrastructure spends will be continuing over the longer term.

There is no quick-money to be made in the market. Investors will have to stay invested for the long-term to make fairly reasonable returns. Over the last four years, we saw a combination of positive factors working for the economy. Those fundamental factors have now changed. It will take time for the fundamentals to stabilise and people will have to be patient during this phase.

Any success or horror stories that you can recount?

In the bull market that was on over the last four years, very few success stories would be attributed to the broker, except in the portfolio management services (PMS) space. It is only in the bear market that brokers are questioned on the kind of calls that they make and the research that they do.

Neither do we get bouquets nor any letters of appreciation when the calls are right. But since we have a strong research desk, the number of queries that we receive from investors has gone up about 20 times. It is in a bear market investors realise the importance of a good research desk.

Do you see any shift in the investment pattern among clients?

Over the last four years, the returns from the Indian markets have been so good that investors have not looked at other options. But there is a change in this trend over the last year or so. Investors are now interested in diversifying their portfolios from 100 per cent equity to other assets. They are considering real-estate, art, debentures, PMS and so on.

How strong are the remittances from non-resident Indians (NRIs) into our markets?

That market is not very large. We have built facilities abroad (e.g. in the West Asia and other markets) and it will take time to build that model. Right now, we are totally focused on the domestic markets.

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