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Market Will Be Volatile As There Is No Clear Solution To Deal With Covid-19 Crisis

Author: Kumar Shankar Roy/Wednesday, April 22, 2020/Categories: The Finapolis Conversation

Market Will Be Volatile As There Is No Clear Solution To Deal With Covid-19 Crisis

Meet TejasKhoday, the co-founder & CEO at FYERS, who’s counted among the youngest professionals to get the NSE’s broker license. He has over 10 years of experience in proprietary trading, risk management, and broking. Tejas and his team started FYERS, a technology-focused brokerage in 2014 with an aim to transform the trading/investment ecosystem in India. In this week’s Finapolis Conversation, Kumar Shankar Roy interviews Khoday about recent trends in Indian equity markets, the entry of first-time investors amid the market crash, technology tools for trading and FYERS’ self-funded growth strategy with promoters’ capital and revenues. Read on to know more.

In light of the current COVID-19 crisis, deviating from historical trends, for the first time new investors are entering the markets. Why do you think this is happening? How many new accounts have been opened with FYERS?

On first thoughts, I don’t think anyone expected new investors to enter the markets during a global pandemic of such a historic scale. It just seems absurd and illogical, right? However, the vast majority of the first time investors are entering the stock markets through mutual funds (MFs). Also, the ones who are entering to invest and trade in stocks are lured in by the collapse in the stock prices in the last two years. First-time investors are seeing this as an opportunity to pick up stocks at discounts as opposed to symptoms of an upcoming recession.

We witnessed the highest Month-on-Month (MoM) growth rate in March of over 40 per cent in both client additions and an increase in trading activity. Last month alone, we got almost 4,000 new clients.

What is your sense of equity markets in India now? We have seen a bounce recently, but macros tell a different picture. What is the possibility that we will again go back to lows?

We think the market will continue to be volatile as there is no clear solution to deal with the threat of the Covid-19 crisis. All governments are in a “Damned if you do, damned if you don’t” situation.

While the lockdown can’t be extended forever, lifting the lockdown can allow the virus to spread further potentially making the situation worse. Nothing can be said about the markets right now and investors will have to think like traders by taking it all in as the news unfolds and positioning oneself accordingly.

From a long-term standpoint, all bets are off the table. Investing without facts & figures is a dangerous path.

Oil prices have dropped a lot. What kind of trends are you seeing in commodity trading? Do you feel traders are missing a beat by focussing solely on equities, while commodities remain largely untapped?

About 75-80 per cent of all trades in commodities are in crude oil. This has been the trend in the last two years at FYERS. Although activity in gold has picked up a lot recently considering the flight to safety from currency and increased stockpiling of gold to face uncertain times.

Yes, I do feel traders need to have an all-round approach. While equities are largely correlated, it leaves traders over-exposed to one asset class. In comparison, commodity prices are determined by the demand/supply in any given situation and they are not as correlated to equities. There are various other benefits of trading commodities and retail traders should make the most of it.

Can you tell us about the Economic Calendar & other TradingView widgets that FYERS has launched for retail traders? Is this free of cost? In layman terms, can you explain how such widgets are helpful for retail traders?

Retail traders lack access to organized macro-economic data & they are mostly reliant on news channels if and when they announce the GDP, Inflation Numbers. Much of it is not reported and key data tend to get missed out. However, having been a full-time trader myself, I know the importance of macro data when making trading decisions.

It is widely acknowledged that to invest in stocks, you need to know the fundamentals and performance metrics. Similarly, for a country, tracking the economic performance that is published regularly is key to being a successful trader. In collaboration with TradingView, we launched an Economic Calendar that gives access to all the major economies of the world. So, you can track important data coming in from other countries which could have a correlation with our economy.

For instance, the US retail sales & factory production data was released and it was worse than expected. Traders can use such data and develop expectations of upcoming Indian data too.

We’re the first and only stockbroker to provide such features. Yes, it is free of cost.

We had last heard that investing on the FYERS platform is also free, i.e., for buying equities and holding them for more than a day, the platform does not charge the user even the flat fee. Is this way of doing business sustainable?

Well, since the majority of the transactions on FYERS are from derivatives and intraday trading. You will be surprised to know that investments account for less than two per cent of the total trades. So, offering it for free merely incentivizes investing.

We want to promote the culture of investing and currently, it’s the most feasible way to do it. We are always focused on the sustainability of our policies. Hence, we are able to self-fund our growth without raising external capital so far.

 

What is FYERS’ plan to become profitable at the net level? Which segments will help drive this profitability?

We have run the business sustainably since our inception in 2015. One of the unique things about our growth is that it has been self-funded with promoters’ capital and revenues. Re-investing revenues every month has enabled us to sustain a healthy growth rate for several years now without burning any capital.

Yes, unlike other startups where burning capital is the norm for the sake of growth, we did not go down that path. For us, being revenue positive was the first priority. Our growth is sustainable because it is being implemented in a gradual and steady manner without burning any capital. I believe that running a business is like agriculture. One can’t expect to harvest as soon as the seeds are planted. It takes time, energy and resources. There are no shortcuts to anywhere worth going.

The plan is to get more traders and investors to use our platform. The only way to do this is by continuously improving the experience for customers. We run a low-margin, high volume business model. Increasing the scale is what can substantially impact the P&L.

 

Five years ago, broking firms with total tech focus were few. Today, there are many. In such a scenario, how does a potential customer compare such tech-driven broking firms? What are the yardsticks that one must use to compare?

This is not true. Even today there are hardly any tech-driven brokerage firms. You will be surprised to know the extent to which technology is lacking in our industry. While most financial companies look at technology as a less important piece that can be outsourced, we are among the handful of brokerages in India that invests significantly to improve our software, IT infrastructure and efforts to automate processes to the maximum possible extent. Not all developments are visible to the customer so there will never be a way to know fully, but I guess the best yardstick is to measure brokers by their efficiency during the lockdown.

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