The recent correction has removed froth in the broader market: C J George

The biggest unknown in the market is the intensity of the ongoing global growth slowdown, says C J GEORGE, managing director and chief executive officer, Geojit Financial Services, in an interview with Nikita Vashisht. Edited excerpts:

Have the markets bottomed out, or are any more surprises left?

The biggest unknown in the markets is the intensity of the ongoing global growth slowdown. While the markets have partly factored in the probability of a US recession, what they haven’t reckoned on is the potential of it being a full-blown one and its impact on global economic growth and corporate earnings. Since valuations in India continue to be higher than the long-term average, and also above those of other emerging markets (EMs), there is a risk of further correction.

That said, we believe the Fed has a good chance of engineering a soft landing for the US economy, particularly after the recent moderation in commodity prices. The correction has removed froth in the broader market.

What have you been buying/selling amid this volatility?

We have been suggesting to our clients to have a balanced portfolio with a mix of equity, debt, gold, and cash. We prefer private banks, fast-moving consumer goods, telecom, and chemicals companies. Lately, we have also added select pharma, auto, gas, and consumption-based ideas.

Have FII (foreign institutional investor) concerns begun to abate as far as India is concerned?

FII selling started on valuation concerns, and gathered momentum with the dollar strengthening and US bond yields rising steadily. The recent moderation in commodity prices is a big relief. The rupee is unlikely to weaken much, which has helped to curb FII selling. In FY23 and FY24, India will be the fastest-growing large economy in the world. Our corporate profit to GDP is on a steady uptrend. Therefore, India will outperform.

How has your business performed in terms of volumes and margins?

Our volumes are in line with the market data, but we do not believe margin norms have adversely affected our business. While the margin norms will make markets safer, the only hitch is that well-capitalised brokers will likely reap benefits from this change, leading to further consolidation in the industry.

How tough is the competition now from discount brokerages?

We have been strengthening our research department to help our clients make informed investment decisions. We have also introduced flexible brokerage plans for those clients who prefer only day trading, but our focus has always been on helping our clients create wealth.

To fight the competition, we have strengthened our product bouquet. For those clients who prefer their investments to be handled by experts, we will offer more diverse model portfolios and PMS. We will further develop our network of branches across India to support new investors.