Rising inflation and interest rates have been putting a cap on the markets for a few months now. Volumes fell by a third in the last 30 days to about Rs 1 lakh crore, representing lack of investor interest.
Just before mid-September 2008 when Lehman Brothers collapsed, there were high hopes of double-digit growth, sustainability of 23 per cent corporate growth and 20 per cent price-earnings (PE) multiple for a few years.
"But that was belied forcing the market to get re-rated to current realities. Economy and corporate earnings were good, but valuations were stretched," Dinesh Thakkar, CMD of Angel Broking, explained.
Even the government has realised that eight per cent growth was sustainable and not 10 per cent. In line with this growth estimate, Angel has brought down the BSE Sensex earnings per share ( EPS) estimate to ` 1,250 by the end of 2011- 12. At 15 times PE, it has pegged the optimum level of the Sensex at 18,500 points.
"Thus, we may not see big returns for investors this fiscal, but it will follow soon after," he said.
Thakkar had plunged into the markets in 1986, dropping out of computer engineering and with little knowledge of the markets.
The intention was to quickly raise capital for his textile business, backed by a manufacturing base in Surat. "But that was bound to backfire, in hindsight," Thakkar added.
Later, he started off as a subbroker and entered advisory business for expanding the scope of the business. He also had to learn the markets the hard way like any other investor - reading and experience. It paid off.
But what made him tick with the clients? He had started issuing real- time trade confirmation over the computer in 1990, when it used to take two to 30 days based on how far away from the metros the client was based.
Client numbers swelled forcing him to expand, even as he was only a sub- broker. Today, at last count, Angel enjoys patronage of 7.91 lakh customers.
Angel Broking was also among the first few broking houses to offer real-time quotes (using walky- talky) to clients in 1998, when it became a corporate member.
Retail investors should realise that the market is reaching the right value, he said. "It has discounted all the fears that are there. Even if a couple of them do not materialise, that will benefit investors further." He also sees foreign investors having no option but to invest in Indian markets going ahead.
However, he warns retail investors against taking leveraged positions. Citing his own experience, Thakkar said that he had made some money in the first round, going by the proverbial 'first time luck'. "Boosted by that experience I had borrowed funds from brokers and invested 10-15 times my capital, and ended up losing 50 per cent of the base capital in the process," he said.
Thakkar, known for his clarity of thought and vision among his friends, has charted out an expansion plan to expand Angel's branch network to 280 in the next couple of years, from 160 now. Most of the new branches will come up in Tier-II and Tier-III cities. Already, Angel leads the broking community in reach with the largest network of about 19,000 trading terminals.
Courtesy: Mail Today