Tech has democratised the investment ecosystem in India: Dhiraj Relli, HDFC Securities

In an effort to understand the dynamic consumer behaviour landscape, the second edition of Pitch BFSI Marketing Summit, saw an invigorating session between Dhiraj Relli, MD and CEO, HDFC Securities Ltd, and Dr Annurag Batra, Chairman and Editor in Chief, BW BusinessWorld and Founder, exchange4media Group.

Asked about what has changed in the financial landscape in the last few years post the lockdown, Dhiraj Relli replied that to put things in context, a lot has changed in the last 4-5 years, mostly post Covid, people have more time, more assimilation of technology. A boom in e-commerce, quick commerce, etc., has led to the financialisation of saving, ease of doing business and investment. Technology has paved the way for democratizing the investment ecosystem in India. This has led to the equilization of the savings. There has been a sharp correction in the market during COVID, there has been a secular trend, a one-way trend which has been upwards only. "It has been creating hallucinations among investors that markets go up only, which has led to an increase in participation in the market," he added.

Social media and media at large have played a role in the democratization of information. There is a change in the access of information to the investors. Earlier the arbitrage of information was with the big companies and institutes but now with technology, there is no monopoly. The arbitrage is now limited and available to smaller investors as well. It is the culmination of a lot of things like ease of doing business, assimilation of technology, digitization, reduced cost of transacting, the drawing parallels in other businesses, and the recent secular rally in the last years that have created some kind of exuberance in the market.

To understand the Indian consumer more, Dr Batra asked, how did the shift from traditional investments to digital assets and fintech platforms happen? Answering to that, Relli said, "Indians have a fancy for real physical assets, like gold or real estate but then they moved to financial assets like FD, Mutual Funds, but the accentuation of digital assets mostly began after the opening of Jan Dhan accounts, Aadhar, and mobility as a trinity, which in turn again helped with the ease of investing by providing information to explore more of these options."

He said that more than 10 crore Indians participated in Crypto during Covid, even if they were unregulated assets and the government or RBI did not endorse them but people still found out and discovered about it. The reason being is the ease of investing, the speculative tendencies that extended to the capital market product. People find it very easy to invest through an app and things that are hassle-free. SEBI reported on IPOs exuberance of primary market in India, more than 4-5 IPOs coming out every week, listing with a higher premium which has led to a heightened activity in the market. This data reveals that the investors are not investing in these IPOs with the intent to hold them for a long period, rather these are some kind of trading speculative activities. More than 50% of IPOs, the number of shares allotted to individuals, get sold within seven days.

"If you look at the value, it's 70 percent in the value and there is a similar behavior in case of HNIs also, so HNIs are not different than the retail investors, in fact those companies that are listing at losses with the price, IPO vise, here the behaviour is slightly different, 20-30 per cent of the investors are selling post listing because they are incurring the losses, probably their loss aversion is coming at play as an investor. Since there is an increase in the market activity and investors with finite capital, they are churning more. IPOs are kind of like lottery only, and people love to test their luck." added Relli.

Dr. Batra then asked if the consumers are using digital platforms and there are new players in the last six years in the investment space, what is HDFC doing to transform their business? To which Relli said "When I took over the company, nine years ago, we were only doing 20 percent business through digital properties, that was in 2016. And before Covid in 2020, we could only reach 60-66 percent of costumers using transaction on the digital platforms. I was told that this is how the costumers behave, beyond a point, we can't mitigate more people than this, as they want access to the relationship manager, they want to call and the trade. They want the comfort of talking to someone and only then transact. This is a capital market, not an e-commerce or a tangible market, this is an intangible investment product. Then Covid happened and post Covid, we had 100 per cent customers, even now 92 per cent of our customers completely transact using the digital platform without any assistance. This just shows that there was an appetite, an assimilation of technology right there."

Moreover, he highlighted that it's difficult for any human to match the speed and access of a digital platform, and that is how we got acceptance and adoption and growth of technology. There is no discrimination from small to big investors digitally. If you want to buy or sell one share or buy one share or more, you get the same treatment. The regulators have done a good job in pushing us to have 100 percent of avail. We have improved our UX widely. We have made it very intuitive and user-friendly.
Posing another question, Dr. Batra asked Dhiraj Relli, “What is the consumer-centricity that you have embraced?” To which, he replied that there has been a kind of disruption that happened when some of the tech-led players started to charge fees on a flat fee basis rather than transaction percentage basis. Secondly, the ease of investing and bringing solutions at the platforms. They have introduced things like basket investments, there are thematic baskets, where in one single basket. We have made it easy for people to get all kinds of share investments, which is made digitally easy and brought on a single platform. We and other industry institutions help people in making informed decisions.

The next level of disruptions or innovation, though many small disruptions come and go, would be an advice piece of it. 20 to 30% correction of the market happening is mostly in SME IPOs. Regulators have also flagged froth in SME IPOs, these are very liquid and only few investors, so one has to start taking note of excessive activities in the SME IPOs including the derivative segment, we all know that 9 out of 10 out customers have been losing money. Everyone is taking measures to educate the consumers, the future is all about advising people to focus on financial planning. With a limited financial planning ecosystem where you can reach out to people for understanding their short-term, long-term and mid-term goals. There are questions like, How do you secure yourself? How do you manage cash flow? How do you manage your finances?, and How do you do succession planning, which will become new areas of intervention.”

Lastly, because Relli has been an advocate for financial awareness, Dr. Batra asked him, “How can an institution like theirs mitigate some of the negatives that come through frothy and through excessive exuberance by financial influencers online, which may not be the best for young investors?”

On this Relli commented: "When young investors spend up to 4 to 5 hours on social media a day, it is hard not giving into the algorithm and getting influenced. What we do is, we continue to strive hard in educating investors and keep guiding them to engage with SEBI regulated research analysts only. Some correction in the market can be foreseen in the future, where the credible investment advisors will play a clear role, the investors will understand who are recognised advisors and who are not. With some intervention by regulators and more market correction, which will create awareness and this has to come from all the participants including the media, in fighting this problem. At HDFC we are very solution-oriented and what works most people through this approach of providing solutions, the ease of doing investment and the credibility of advice in an ecosystem like this that comes from our 25 years’ experience, we stand strong.”