‘Discount broking space getting overcrowded; Sensex can hit 100,000’ | News on Markets
Over the past few months, market regulator Sebi has cautioned regarding the speculative activity in the stock markets. CJ GEORGE, founder & managing director, Geojit Financial Services, tells Puneet Wadhwa in an email interview that the young breed of traders will continue to trade in the fast-growing derivatives market because of the inherent gambling instinct of the human mind. Edited excerpts:
How will the Sebi directive to discontinue levying slab-wise fee impact the industry? Are you taking any steps to proactively compete with discount brokers?
We are not competing with discount brokers, and do not have any plan to do so in the foreseeable future. Also by choice, both operate in entirely different spaces. For us, a trade is only a means to an end; whereas for discount brokers, trade is the end.
Do you think it will be the end of the road for traditional brokerages over the next 10 years as derivative trading picks up pace rather than advice-based stock investment?
The other route, which is much more meaningful, is to be relevant by helping clients create wealth. Today, non-brokerage revenue is more than 50 per cent of the revenues of Geojit as we started the strategic shift towards client’s wealth creation seeing the all-round losses among retail derivatives traders. Importantly, almost 80 per cent of our brokerage income is from cash equity business.
The young breed of traders will continue to trade in the fast-growing derivatives market because of the inherent gambling instinct of the human mind. As and when the derivative traders realise that they are not making money and particularly when they have serious money to invest, they become investors.
How far is the Broking, PMS industry from becoming overcrowded?
What’s your view on the primary and the secondary markets for the next one year?
The secondary market is likely to enter a risky zone due to high valuation in the short-term. However, with the country’s growth trajectory being intact, long- term investors will continue to bet on the market when the correction happens. I expect the Sensex to cross the 100,000 mark in the next two to three years, subject to any worldwide economic collapse.
Any budget-related wish list from the broking industry?
I do not think the government will increase the capital gains tax. Globally, a growing number of parliamentarians are worried about legitimised gambling through stock exchanges which has social and financial implications. Hence, there could be announcements including taxation changes to disincentives trading other than for hedging.
The increase in income tax rate will not make much difference as only very few traders make money after all. For those who make money, what matters perhaps is a vibrant market to continue to make money and not any increase in taxation. In any case the cost is relatively low for algo traders.
First Published: Jul 02 2024 | 9:06 AM IST
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