Ms Chandra Ramesh, Managing Director of IFCI Financial Services (IFIN), said heavy competition in broking space has extended the gestation period for new brokerages. Ms Chandra Ramesh shared her thoughts about her company and markets with Business Line .

Give a brief history of IFCI Financial Services, and about its stakeholders

IFCI Financial Services Ltd was promoted in 1995 by IFCI Ltd to provide a wide range of financial products – institutional and retail.

IFIN was 100 per cent owned by IFCI till March 2008. Thereafter, a Chennai-based broking house C.R. Finance & Securities (P) Ltd merged itself with IFIN and its promoters obtained a minority stake in IFIN.

At a time when established brokerage houses are struggling to expand retail base, what promoted you to focus on retail segment?

IFIN was totally concentrating on institutional broking from 1995 to 2008. The factors that prompted retail thrust were: It was time IFCI's brand was exploited; and 2008 was a year when the markets were in the dumps and for a long-term player, it was ideal to assemble a core team at reasonable costs. It was also a good time to selectively spread to encash on upturns.

The company was also clear to have its footprint in a measured way and not to be rash in its retail foray. It was also keen to have a healthy mix of own branches and a solid sub-broker network to ensure profitability and quick geographical spread and visibility.

What are retail clients expecting from brokerages, apart from general service?

Retail clients look for unbiased advice. Traders look for intra-day and short term calls to capture momentum and profit out of it. They also look for one stop solutions for all their financial needs.

You said the gestation period (time to break-even) has increased for brokerages houses to 4-5 years now compared with 3 years earlier. Why is it so?

It is basically due to drastic reduction in brokerage levels in the industry as compared to 5-10 years before. Initial investments towards manpower and other broking related services have also gone up now. Besides, a few years back, the market condition was good, so a lot of retail participation was there. But after 2008, retail investors turned very cautious.

Why do you feel the merger and acquisition in broking space may not be a winnable proposition any longer?

We are not saying that. We are of the view that if some practical problems are cleared by the regulator, we will have more M&As happening in the broking industry. A case in point is the KYC which has to be filled up by clients all over again when the merger happens and the clients are put off when they have to sign in innumerable places.

Any plans of IFCI, your parent company, diluting its stake in the company?

There is always a possibility, though no time frame can be given.

With interest rate ruling high, is it not prudent for retail investors to stick with fixed deposit and debt instruments rather than entering equity segment at this point of time?

Retail investors come in all ages. Though this may be boom time for the seniors in the debt market, this is certainly the time for the younger lot to wet their feet in equity. Even for the elders, there are opportunities for good dividends in a down market.

There is some talk of a steep correction in the market soon. What is your opinion?

We do not foresee such an event in the markets.

Which sectors should investors focus on for the medium and long term?

Infrastructure, Bank & Financials, IT, Power, FMCG, Hotels, Pharma, Steel

If FIIs pull out, due to the European crisis, where do you see the markets heading?

We believe that the Indian market needs some structural changes with more investments by domestic long term investors like insurance, pension and PF to counterbalance the FII's.

If most volatility in the market is being brought about by institutional players, how should the retail investors navigate such markets?

It is advisable that retail investors do not indulge in futures market. Options is a better strategy, provided they have understood it.

They would also do well to invest in quality companies run by managements with good corporate governance.

Related Topics
comment COMMENT NOW