‘In the medium term, retail volumes will trend upwards’

After a sharp rally in equity markets since their March 2020 lows, KRISHNA KUMAR KARWA, managing director, Emkay Global Financial Services, tells Puneet Wadhwa that FY22 should see robust growth in the domestic economy, and current stock prices broadly re

What is the outlook for markets for the rest of 2020?

Markets will be looking for cues on the sustainability of gains made so far and for incremental recovery in the domestic economy in the July– September quarter. The key monitorable now would be the speed with which urban India will come back to business as usual. The next steps the government and the Reserve Bank of India will introduce once the moratorium ends on August 31 are also keenly awaited. At the global level, the US Presidential elections are important. That said, Indian markets have possibly overshot, and should consolidate. Sector- and stock-specific rallies and corrections might be the order of the day.

Are they looking beyond the possibility of another stringent lockdown?

They are reasonably confident that there will not be any more countrywide lockdowns, and henceforth, lockdowns will be localised and restricted to severely impacted states or districts. FY22 should see robust growth in the domestic economy, and the current stock prices broadly reflect this expectation.

Retail investors have been actively participating in the recent rally. Do you see this trend sustaining?

There has been massive increase in retail participation in the last three months as can be seen in the number of demat accounts opened. The share of retail participation in the cash market has also surged to almost 75 per cent, from pre-covid 55 per cent. This retail surge is more from day traders. Once the economy fully reopens,

some of these enhanced volumes will subside; however, in the medium term, we are very optimistic that retail volumes will continue to trend upwards. Extremely competitive brokerage structures and tech-driven brokerage platforms will continue to attract new tech-savvy traders.

How much dent do you expect in the overall trading volumes once the new margin norms are implemented?

Improved risk management measures introduced by regulators are always good for the overall ecosystem. In the initial few months, volumes might take a beating — but to what extent, only time will tell. Do remember that if there is money to be made, participants will come in droves, and such irritants will be forgotten sooner rather than later. For whatever reasons, if there is sharp correction, these revised margin norms will get their fair share of the blame. Apart from individual investors who are impacted, even portfolio management services and alternative investment funds are at a distinct disadvantage on efficient execution and deployment of surplus liquid funds.