Jones George, Executive Director of Geojit Financial Services is of the view that retail investors should do a basic study before investing such as knowing the objectives of the schemes and the historic performance of stocks. Direct equity investment should be supported by scientific methods like fundamental and technical analysis. In an interview with MintGenie, George shared his views on the Indian market and suggests how first-time and new investors should invest in the market.
Could the market meet your expectations in 2022? What is your view on the current market structure?
At the beginning of the year, we had a constructive view of the equity market with a moderate expectations on returns.
However, this viewpoint shifted during the year as a result of hyperinflation led by the Russia-Ukraine war and China’s zero covid tolerance policy which led to supply constraints.
The global economy slowed down, triggering a change in investment patterns with a fall in liquidity impacting the performance of many sectors and mid and small-caps.
The current view is that the performance of the world equity market will be better compared to 2022 due to improvements in global supplies and reasonable monetary policy in the future.
However, the broad valuation of India continued to trade at a premium, which is likely to reduce, leading to underperformance compared to other EMs (emerging markets) and developed economies.
Still, we can expect a positive moderate return, being an essential part of the EMs.
When do you expect a pause in rate hikes? Is India well-placed to endure the pain of a recession in the US?
The pace of rate hikes will slow down from here on, as inflation has peaked and is forecasted to rapidly reduce.
However, the trend of inflation continues to be on the higher side.
A pause is likely during the year 2023, depending on inflation and recession.
Currently, the market expects a mild and not a long recession as it is a non-structural problem.
A recession in the US, being the largest economy, will have a ripple effect on the rest of the world though, India is better placed to bear the cycle.
While Europe is in a worse position to bear a bigger recession due to the energy crisis.
Would you recommend staying away from the IT sector at this juncture? How hard will a US recession hit the sector?
No, I think it is a good opportunity to buy into the IT sector for long-term investors with an accumulation strategy. Volatility can prevail in the short term due to the fear of a global recession.
However, this recession is forecast to be temporary and not plagued by structural issues.
Secondly, many aspects of the issues are factored in the low prices of Indian IT stocks, which will limit further downside.
How has technology brought about a change in the traditional broking industry? How was the trend in 2022, and will it have a major impact on tech-enabled trading in 2023?
Technology has shifted both the business models and the customer expectations in the broking industry.
In the past, dealing was a skill, while today, it is becoming akin to transaction facilitation on some level.
This has enabled stockbrokers to come up with innovative and diverse pricing models.
Pure online transactions shift much of the transactional risks away from the brokers, which has enabled cost reduction.
Today, there are online-only brokers providing platforms to full-scale brokers providing allied services and physical relationship management depending on customer needs.
Owing to this, we started seeing customers beginning to move to full-service brokers from online-only brokers.
Full-service brokers always have the advantage that customers are more comfortable knowing that the custody of their shares is with their next-door office.
Technology has also enabled newer product offerings in the market like charting, backtesting solutions, algo-trading and so on.
These platforms can now be seamlessly integrated with trading accounts through APIs and their business models are much different than broking.
A decade ago, such innovations were hard to come by.
Covid accelerated the adoption of technology among traders.
More than 85 percent of Geojit's business is online and we only foresee this to increase in the coming years.
As the expectations of our clients change, we have to deliver for future growth.
Options Lab and TraderX are two new offerings to our clients. For 2023, we will see similar, if not better adoption of technology.
The next two to three years will be the years we will see many innovative platforms being launched.
There has been a surge in retail participation in the Indian equity markets. How have you managed to cope with the rising needs of your customers when it comes to speed and accuracy of data, execution of trades, use of data analytics and artificial intelligence/machine learning in helping them make smarter decisions?
Geojit has always been a technology-oriented organisation. We were the first to launch online trading in India back in 2000.
However, the surge in the number of participants was much faster than we anticipated.
We had to scale up our technology infrastructure within a shorter time frame.
Since technology is a core competency for Geojit, we were able to ensure data accuracy and trade execution with minimal loss.
Data Analytics and Artificial Intelligence/Machine Learning (AI/ML) are evolving concepts in the industry.
We use data analytics to understand how our customers interact with our platforms, and their pain points, to improve the onboarding experience and how to efficiently manage customer queries, amongst others.
Regarding AI/ML, I think it is a term that has been loosely used across the world of technology.
At least in our industry, most of what is called AI/ML is largely process automation.
We are currently experimenting with some robotic process automation which can help us reduce our turnaround time across various processes.
What is your advice for retail, first-time investors? How should they invest in this market amid tremendous uncertainty? What sectors should they bet on?
First-time investors are advised to start the journey with a designed approach like investing through SIPs, ETF and A-group stocks.
Do undertake a basic study before getting into the waters like knowing the objectives of the schemes and the historical performance of stocks.
Scientific methods like fundamental and technical analysis should support direct equity investment.
A long-term investor should depend on the financial and business skills of the company and industry. The best will be the performers which are equipped with solid products, demand, and management skills.
Based on the current market scenario, avoid stocks which are heavily priced, as their performance will be beaten during 2023 as value buying will be the theme.
Good sectors will be green initiatives, FMCG, pharma, telecom, energy and IT.
Luckily, 2023 is likely to be a good year to start investing due to the decent correction of mid and small-caps and a few sectors during 2022.
Disclaimer: The views and recommendations given above are those of the analyst. These do not represent the views of MintGenie.