While there has been a proliferation of discount brokerage firms, Anand Rathi, Founder & Chairman, Anand Rathi Financial Services, is unperturbed about its impact on his broking business. This is because the market veteran, who has been in the broking business for close to a silver jubilee, believes that financial literacy in India has not reached a level where majority of people can invest money themselves. Excerpts:

What is the average return one should expect from the Indian equity markets?

I would not advise to put money for six months. With a three-five-year view, I expect equity markets can give reasonable returns of 15 per cent upwards.

Which sectors are you bullish and bearish on?

I like infrastructure sector (especially engineering procurement and construction space) as major investments have started happening. I also like the banking and NBFC sector as liquidity is very high, banking needs are growing and interest rates are likely to fall by 50 basis points in the next one year. I am more bullish on public sector banks as they are more undervalued and most of them are trading below book value. The automobile and cement sectors will also do well as infrastructure improves and interest rates fall. I like all the three segments in the automobile sector — two-wheelers, passenger vehicles and commercial vehicles (as the economy picks up). There is hardly any sector which I don’t like with a three-year view.

Have you been impacted by zero brokerage firms?

There is no brokerage firm which is zero brokerage firm. There are different models. One is online and another is assisted model. A person who is capable of taking his own investment decisions will opt for low brokerage services. But financial literacy in India has not reached a level where majority of people can invest money themselves. Even traders need some advice.

Low brokerage houses have been there for a long time. How much market share have they been able to garner? We are in the broking business for the last 22 years. Our brokerage rates have not gone down in the last two years. Our proposition is that we add value and we are charging a miniscule rate of 0.25 per cent.

What businesses will drive your growth? What are the expansion plans?

Wealth management and NBFC will be the key drivers for our growth. We are primarily focussed on ultra high networth individuals with average ticket size of ₹5 crore and we are managing about ₹15,000 crore. We are present in every capital of India. Seventy to eighty per cent of our business is from Tier 1 and 2 cities. Within five years, 50 per cent of our business will come from Tier 3 and 4 cities.

Our book size in the NBFC business (loan against shares, treasury management and construction finance) is ₹2,000 crore which will become ₹10,000 crore in the next five years. We have just started lending to small and medium enterprises.

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