One Jane Street does not mean Sebi will throw baby out with bathwater; wealth management stocks in, brokerage out: Ajay Srivastava

Economic Times

2 days ago

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, CEO,, says despite market misconduct concerns and the rise of algo trading, the speaker believes the Indian market will persist. Penalizing wrongdoers is crucial, but overregulation could stifle growth and depth. F&Os provide market depth, benefiting wealth management, while pure brokerages face challenges. The market's potential remains vast, and volatility is an inherent aspect to navigate.Let us be honest, every market in the world including the US market, had these problems of having these bad guys like Milken. At the end of the day, every market will have its bad apples. We still do not know what is going to happen legally. But we are in an era of algo trading. Like it or not, machines trade faster than humans, they decide faster than humans, they analyse faster than humans, that is the fact, alright.Now, the question remains that did a player become so dominant that he could influence the market and if it did and whatever comes out, he should be penalised. I do not think it is going to impact the market, barring temporarily affecting F&O volumes by and large because there are different institutions. There are 150-200 people who want to play in this market, large institutions, a couple of million individuals, HNIs, and portfolio offices. It is not that people are going to run away from trading.The issue comes back to what happens to the SEBI regulators. If they want to come down heavily on F&O trading, algo trading, sure the volumes will go down. Long term, I do not see a reason for them to do this. Let them open the market. It has given you depth in the Indian market. We have been able to trade and become a global trading destination. Why do you want to destroy it? You saw what the previous Sebi chief did was destroying volumes left, right, and centre. We need to open it up. Temporarily, yes, there could be a shortfall. But broadly speaking, F&Os give depth to the markets.You still have to rein in the bad guys, and that is a job for SEBI. But dealing with bad guys does not mean you throw the baby out of the bath water at the end of the day. Just because the plane crashed, does not mean you stop flying. Similarly, just catch the bad guy, penalise him, find the brokerages which are part of the issue and penalise them heavily, make an example of them so that no one dares to do it again. But that does not mean the market is going to die down. Market is much bigger than all of us and all of the institutions.So, do not worry, the party will continue and it has just started. How many people actually participate in the F&O market in this country of 1.3 billion people? It is a very-very long way to go.You have to differentiate between brokerage stocks and wealth management stocks because some of them have become quasi brokerage and wealth managers. You would tend to invest on the side of wealth managers because that is the business which is growing and growing leaps and bound. It is going to get competitive, margins are going to go down but the volumes are growing tremendously.As it becomes more difficult to make money in the market, like right now, people are going to go to the professionals and park my money. The PE industry has shown globally that returns upwards of 25% per annum are a norm in the PE industry in equity is not an exception. Therefore, people who are doing wealth management will keep growing. But pure brokerages is a no-go because that is a no-way street to make money. You cannot make money in brokerages anymore. So, standalone brokerages are not going to work for you. We are not going to invest there.But for wealth management companies, the answer is yes. But learn to live with volatility. One of the stocks you named was down almost 40% in September after the bad result and in the December quarter and since then has recovered back almost everything. Now the question is when were you the buyers? Were you buying at Rs 900, 600, 700, or did you buy at Rs 900, sell at Rs 600 and wait till Rs 900 to buy back? Wealth management companies are very interesting buys, but do not buy them at a market peak. You will get a chance to buy these companies at a much cheaper valuation. Wealth management is in, brokerage is out.