HDFC Securities to chase market share and derivatives in 2023: CFO

Indian bourses outperformed their global peers and the UK-based financial services provider, CMC Market, found India to be the second-most stock-obsessed country in the world, after Singapore.

This backdrop could well explain the gung-ho perspective Kunal Sanghavi, the chief financial officer (CFO) of HDFC Securities Ltd exuded during his tête-à-tête with DH’s Shakshi Jain, on the outlook for 2023 - both for the Indian stock markets as well as the stock broking subsidiary of HDFC Bank.

How did HDFC Securities close the year 2022 and what are your goals for 2023?

HSL’s performance is broadly in line with the industry in 2022. We had grown very well in fiscal 2021 and 2022 by 80% and 40% respectively, on a bottom line basis. In 2023, we look forward to increasing our market share and having deeper penetration in the derivatives segment. Our new launches and low cost brokerage platform will complement these objectives and enable taking customers and business volumes. A lot of capex investments have been made over the last couple of years, which we will be taking to customers in 2023.

Read | HDFC Bank's Q3 net profit jumps 18.5% to Rs 12,259 crore

What are some of the new features that HDFC Securities is planning on launching?

The new features will study what you’re doing within our digital properties and make relevant recommendations. Secondly, you can compare many mutual funds. If you are a user who doesn’t want to look at mutual funds or derivatives you can switch them off, or chose what you want to see, It will be a customised, personalised experience.

Our new releases will also include an integrated approach with a lot of third party service providers and fresh and better UI/UX.

What is your outlook for the Indian equity market in 2023?

India has outperformed some of the major economies in 2022 and I believe this trend will continue in 2023 as well, leaving significantly large alpha for investors on the back of a robust India Inc performance. Considering that there is a recessionary trend globally, India is expected to experience huge volatility and broader indices may not demonstrate huge returns in absolute terms while still being better off than the global peers.

Among our Asian peers, which markets are likely to perform well this year?

India is expected to be best, especially given the oil prices pact signed by the Indian government with Russia and settlement in rupee terms, coupled with successful vaccine and better management of Covid. Economies like China are still struggling with Covid problems and all global companies even though operating out of China want to have a second base which is generally India. With this, China may grow around 4% in GDP terms, while Hong Kong may grow between 2% to 5%. Economies like Singapore and Japan may remain around 1%.

Which sectors are likely to do well in 2023?

BFSI - especially banking and capital markets - has been doing very well in India on account of continued growth in overall money in circulation, coupled with higher credit, scalability and ease on account of digital adoption.. Number of customers in this space is also increasing exponentially. Next is consumer and FMCG companies which will see larger consumption due to increasing purchasing power of customers while the IT sector may see some respite due to rupee depreciation and constant ongoing demand of technology adoption across the globe. Auto is seeing continuous higher numbers and some of the new trends like EV seeing huge adoption may see some traction in 2023.

Manufacturing has already seen a long wait to take off across the country and government efforts to bring it into the mainstream is paying off slowly. However, it is yet to be seen whether it actually gets as much traction in 2023 or there is more waiting.

What are your thoughts on the market’s appetite for IPOs this year?

Robust demand continues for companies whose business models are attracting large customers, have innovative or disruptive products, pricing and have already started seeing traction. These companies will see good IPO fulfillment vis-a-vis companies which are at a nascent stage of their product pivoting. Having said this, investors will be cautious in valuations and may not be ready to subscribe easily to companies burning monies.

How do you see FPIs behaving this year in the light of global recessionary fears?

I believe they have been relatively muted in 2022 on account of global pains and recessionary trends. In 2023 considering robustness of Indian markets & GDP growth predictions above 7%, I see FPIs being net buyers with larger fund allocations in Indian markets. However, I see that happening in the second half, and dependent on how global inflation, interest rates and recession pan out.

What are some of the headwinds that may affect Indian equity markets, moving forward ?

At a macro and global level oil prices, interest rates are definitely going to have a direct impact on the economy while inflation still continues to be the biggest issue concerning the markets. It can be fairly argued that India is de-coupled but the fact of the matter is global pains are going to slow growth of big Indian companies for a while although not stop (completely). At a micro level there are aspects like success of 5G rollout, successful implementation of government policies & regulations leading to reforms, monsoon, productivity, etc which should not be disturbed for constant growth. India Inc should get the right talent and other factors like metal prices, transport & labor cost are going to impact profitability and growth adversely.