Indian equity markets may face gyrations in the short to medium term due to a variety of reasons but the only way is up in the long term. Motilal Oswal, Chairman & Managing Director, Motilal Oswal Financial Services, is extremely bullish on equity as an asset class. He advises investors to have a long-term outlook and pick quality stocks. Excerpts:

How high can Indian equity markets go from 31,000?

The Sensex may touch 1,00,000 before 2025, which can be a three times rise in the next eight years. It took 11 years to jump 10 times from 100 to 1,000, 16 years to move another 10 times to 10,000, and so on.

But corporate financial performance has still not picked up. How is it possible?

In FY17, Nifty companies’ earnings growth was 8 per cent after three years of flat growth. It would have been more (probably 12-13 per cent) if there was no demonetisation. In FY18, we expect a 15 per cent growth in earnings, backed by drivers such as GST, good monsoon, lower interest rates and a stable political scenario.

Sectors such as commodities, cement, private sector banks, automobiles, housing finance companies, NBFCs, chemicals, and affordable housing will drive the earnings growth, while public sector banks have almost seen the worst of times.

Are you making your employees also rich along with investors with your stock touching record highs?

We had more than 3,700 employees as of FY17. Around 85 per cent of our employee strength is holding ESOPs of the Group company or its subsidiaries. The quantum offered varies based on the tenure and designation of the employee in the organisation. ESOP is definitely a great tool to retain and attract the best talent.

Has discount brokerages impacted your broking business?

About 45 per cent of our retail broking turnover happened online in FY17, up from 36 per cent in FY16. We are not reducing the price to get marketshare. We feel that there is a big customer segment in the market which needs advice as well as execution. We do not want to be in the space where one provides only an execution platform to trade at the lowest price. Our business is a combination of technology and advice. Discount brokerages have not affected our business.

Please update us on Aspire Home Finance and its future growth.

With branch presence across nine States, Aspire Home Finance is the only affordable housing finance company with a national footprint. Our loan book in FY17 grew 100 per cent year-on-year.

The affordable housing market in India can grow over 25 per cent for the next few years.

We will definitely do better than the market.

Many developers have entered this space. Further focus has now come with the government’s thrust towards housing for all, RERA and incentives. The lowering of interest rates, going forward, will further push the growth.

Any plans to list it?

We have no plans to list this business in the next two years, at least. We have enough operating cash flows generated from our other business to fuel the needed capital for our home finance business.

What do you attribute the strong financial performance in FY17 to?

I would attribute our robust performance to strong growth of our asset management (mutual funds, portfolio management), housing finance and investment banking businesses.

Capital market businesses, which formed 62 per cent of our net profit in FY15, now account for 30 per cent(FY17). Since the last five years or so, we have been deliberately trying to de-risk our business model and reduce our dependence on equity capital markets, specially retail broking and institutional broking, which are volatile.

So, will your share capital market-related businesses continue to wane?

The excessive dependence on capital market-related activities used to worry us earlier, but now not so much. We are comfortable with the share of capital market-related businesses remaining below 40 per cent.

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