Coronavirus Lockdown 4.0: Indian brokers take long view telling clients to write off year

By Nupur Acharya
India’s stock brokers are coming up with new strategies to serve clients and partners, as the nation gradually reopens for business under the cloud of pandemic-led uncertainty.

The initiatives, ranging from arming financial advisers with tablet computers to extending the horizon of price targets, draw on lessons from the world’s biggest lockdown that has imposed economic and social stress on companies.

“We believe that account opening will become 100% paperless across industries in a post-pandemic world,” said Shrini Viswanath, chief technology officer at Upstox, a discount broker. Using secure electronic systems to process documents will make compliance easier for investors, he said.

India has added more than a million new equity traders in the last two months as people, locked up at home, take up stock picking. About 1.2 million new Indian accounts were opened with a securities depository in March and April, up from a combined 900,000 in the first two months of the year, according to data from the Mumbai-based agency.

Just Buy or Sell

The prolonged disruption of economic activity has eroded company earnings with analysts cutting 12-month profit estimates for the NSE Nifty 50 Index firms by 13% since January. With the outlook uncertain, Reliance Securities Ltd. has withdrawn hold ratings for stocks. For now, it’s only applying buy or sell recommendations and two-year price targets.

“By moving to a two-year target price, we have tried to take out all the short-term noise in our recommendations and our research,” said Arjun Yash Mahajan, who heads institutional business at Reliance Securities. This has “plugged in a big gap” as investors with two to five year horizons hadn’t been getting any research, he said.

The brokerage has moved away from issuing quarterly updates and reports to only give earnings snapshots with key takeaways from post-results conference calls.

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“In the current environment, where the 2021 financial year is virtually a write off, focusing on FY22 is the most rational thing to do,” he said.
Tablet Offices

IIFL Group, India’s second largest wealth management service firm in terms of assets under management, last year armed independent financial advisers in India’s hinterland with tablet computers to help it get new clients in smaller cities. As employees and IIFL’s partners work from home during the lockdown, the strategy is paying off.

With more customers now using mobile apps to trade, advisers with a tablet costing less than $200 can sell all brokerage services, from live trading to fund management.

“If clients stared using technology during the lockdown, the manager too got on to it and is now becoming a multi product expert or a financial planner rather than just an equity broker,” said Chintan Modi, who helms the drive and helps train users.

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In recent days, the monthly addition of advisers on the platform has doubled to more than 3,000. IIFL expects to add between 200 and 250 more each month at least through next March, the end of the 2021 financial year.

Focus Options

Meanwhile, the discount broker Upstox has ramped up a platform that lets users plot options strategies and place orders after it saw a 2.5 times increase in traders of the contracts last month from a year earlier.

“While the national lockdown has caused disruption across all segments of business, at Upstox, we have witnessed a spurt in business in terms of the growth of customers and trading volumes,” said Viswanath.