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00:00I'm joined by Suresh Dharak of Bond Bazaar as well as Ajay Manglunia of JM Financial who are with us
00:07today. Thank you so very much to both of you for taking time out for us.
00:13Thank you Pallavi. Good afternoon. Good afternoon to you as well. So I'll start with you Mr Manglunia.
00:19Can you talk us through the move and what is the expectation? Do you see retail participation going
00:26up post the move? This is the second time that the SEBI has in recent times cut the ticket size. It
00:33was earlier 10 lakh rupees. It was brought down to 1 lakh rupees. It has been brought down further
00:39to 10,000 rupees now. Yeah absolutely you are right Pallavi. The thing is that 10 lakh rupee
00:46was a slightly high ticket size and market representation was such that we should reduce
00:52it and SEBI was kind enough to reduce it to 1 lakh rupee. That has kind of created some volume in
00:57the debt space but then after a lot of bond platforms which were kind of in the area and
01:05they started activities. It was easier for bond platforms to reach out to the retail investors
01:11online and as you are aware 1 lakh rupee is kind of a HNI segment to some extent and retail is
01:19really retail. The options available to the retail is either go through the public issue route
01:24wherein they can invest in multiple of 10,000 rupee and 1,000 thereafter the ticket size but
01:30making 10,000 rupee as an option in the private placement segment is a welcome move and that is
01:36something which industry was demanding for since a very long time. This will not only create
01:42liquidity but will kind of increase the various options available through the online bond platforms
01:48at competitive levels for investors to look at the options. Now the riskier instruments which are
01:55considered to be like capital instruments perpetrators and all of that they still are in
01:59multiple of one crore rupee but some of those simple and safe instruments wherein the retail
02:07can easily participate are going to be available to them via platforms in a variety of the various
02:15papers. Okay, all right. Coming to you Mr. Dharak, do you see retail participation moving up after the move?
02:24Sure, in fact it's a big step. In fact probably few years down the line we will talk about this
02:31event. It's a game changer for the entire financial market and the way the retail is saving money.
02:36Right now if you see from the retail perspective they were not having any option to
02:40go to save money, accept fixed deposits or go in the equity market or go through the equity mutual
02:45fund or debt mutual fund. Now with this 10,000 rupees they are waiting one more option to invest
02:51directly in bond market get three to five percent higher yield as compared to fixed deposits which
02:57is a big thing. In fact you know it will it is a game changer for the issuer also the people who
03:04are mobilizing money. Now retail works as a base, retail works as a you know a big investor class.
03:11Once they start working as a big investor class it opens up a new avenue to raise money. So it's
03:17a big event, it's a big event for the market. Okay, all right. Definitely I see a big participation
03:24from the retail coming in this market now. Okay, all right. So coming back to you Mr. Manglunia,
03:30so we have seen both the SEBI as well as the RBI take multiple measures to increase
03:36retail participation in case of the RBI for GCEX and in case of the SEBI for corporate debt. So you
03:44know so far like even the RBI's measures have been met with limited success. We are yet to see
03:51large-scale retail participation you know in government GCEX and that's despite what
03:58recent yield trajectory has been like. So what do you think is stopping retail investors from
04:06more actively investing in this space? Is there need for more measures to encourage participation
04:11further? I think basically a game of liquidity. The thing is that the RBI measure for allowing
04:18retail to invest in the government securities. The government securities are providing certain
04:23level of yields. This is the safest, this is the sovereign and the yields are near about seven
04:29percent level. The retail is kind of a risk taker and they need more and more returns.
04:37I think the game-changer is Tareq Shah has mentioned that 10,000 rupee is a small denomination
04:44and in the corporate bond the options available to the retail investors to save their money in
04:50the financial assets is either FDs or small savings and all of that which are in the range of
04:57six, seven percent kind of returns. But in the bond market you have variety of instruments, you have
05:02variety of borrowers and you can easily expect the returns in the range of nine to twelve percent
05:08range which is a game-changer which is kind of a sufficient incentive for this initiative to
05:16be a enabler for retail participation in the corporate bond. The thing is that the government
05:22securities are slightly longer dated and they are kind of the safest one and will not be able to
05:28provide them higher returns in the double digits. But corporate bonds definitely can provide them
05:34the double digits kind of returns and that is something which will encourage people to save
05:39more money and put it in the financial assets. Today the equity market is at its peak and you
05:44never know it will continue to keep moving up and up that nobody knows. But in terms of risk
05:50and safety probably people would like to diversify, they want to become disciplined, they want to put
05:56money in the deck where the assured returns are available without taking any risk. The onus is now
06:02on issuers and the merchant bankers to advise correctly and get the right set of issuers in
06:07the market which are kind of good investment options for retail participation. All right,
06:15coming back to you Mr. Dharak, so you know you've spoken about how the move is expected
06:19to be beneficial to not just retail investors who are seeking to diversify their portfolio
06:25but also to companies. Tell us a little bit more about that. I tell you that see by any imagination
06:34if you think the size of corporate bond market is very huge it is around 40 to 50 lakh through
06:39it is very huge but you know retail participation is negligible as of right now and it is growing at
06:46the rate of almost like 20-25 percent every year. In all the developed market bond market is almost
06:52like forex of equity market. Right now in India the bond market is like closer to 75 percent of
06:58equity market and GDP. I expect that you know if you want to become a developed economy if you want
07:04to become a five trillion dollar economy the bond market will multiply from here in big time and
07:10with this step see SEBI has taken many steps to boost retail participation in the bond market.
07:18They have formed online bond platform association, they came out with the guidelines for online bond
07:23platforms, they have reduced the face value, there are tax arbitrage which was there between
07:30debt mutual fund and the direct investment they have removed that one by the ministry. Now see
07:37the biggest thing is you can buy and sell bond just like equities and it is also available in
07:43the cash segment of the you know market you can just buy and sell which is a big thing. So what I
07:50expect from here it will bring the transparency in the market around 70 to 80 lakh crore of retail
07:57investors money is locked in saving account in current account where they are earning less than
08:02three percent return hundred lakh crore in six deposits where the returns are less than seven
08:06percent in bond market you can get written anything between seven percent to fifteen percent fourteen
08:12percent so it will open up the new avenues to raise money it will you know when some issuers
08:20are reaching out to retail investors directly the intermediary cost which is almost like three to
08:25five percent whether it is through bans or mutual funds or something it is the income it will become
08:31the income of retail investors so it is beneficial both for the issuer and for the retail investors
08:37so in times to come probably what I see that retail will become a big force in corporate
08:44bond market and that is a game changer that's a big game changer for the entire financial market
08:50and once that will happen the returns you know across a particular threshold limit as Ajay said
08:56it's a big thing. Right okay and while we're in discussion regarding SEBI's latest move to boost
09:03retail participation we're also seeing visuals of team India in conversation with Prime Minister
09:10Modi in Delhi the team has returned from Barbados earlier today morning they're in conversation with
09:17the PM post which they will be leaving for Mumbai where they will take part in a celebratory road
09:24show in Marine Drive today evening but coming back to Mr. U Mangalunya coming back to Mr.
09:32Mangalunya I do have one last question in terms of retail participation so you know we have been
09:40seeing more retail participation via mutual funds in debt markets how is the retail investor
09:50experience different investing in debt markets directly versus mutual funds what is your advice
09:59to retail investors on that? My advice to the retail investor is that they can continue to keep
10:05investing in the mutual funds that is the side by side they can they can start a journey of
10:11making investments directly into the bonds and end of the year you will be able to see the difference
10:17I'm not against any set of investment class but the difference is very much visible one is you
10:24are kind of handing over your money to an asset manager and it is up to his choice and up to his
10:29risk appetite and assessment he chooses to be very very safe and he chooses to be very very liquid
10:36every investor might have a different set of risk appetite every investor might have a different set
10:42of liquidity requirements by way of investing directly into the bonds I don't say you are
10:47foregoing the liquidity the bonds are listed they are a capital in the market as Suresh said that
10:54the liquidity and the volumes will kind of change from here and that's a comforting aspect
11:01the intermediation cost of the NIM and the cost of intermediation and all of that will go away
11:10there's going to be a win-win for retail as well as to the issuers so thing is that the
11:16direct investment is direct control of the risk and I see that in terms of ensuring that
11:24the rightful companies are reaching out to the retail there is a process and it's as tighter
11:29as doing a public issue of bonds you need to have a due diligence you need to have a merchant
11:35banker's signature for ensuring that the disclosures are up to the mark and that will
11:41ensure that right set of companies are coming to the market for investment option available to the
11:46retail so one can compare my suggestion to retail is that you don't ignore any of the segment
11:53stay investing in both and compare yourself what suits you best there will be a real difference
12:00in terms of returns all right well all the more reasons for retail investors to directly
12:07invest in India's corporate debt markets thank you so much Mr. Dharak and Mr. Manglunia for
12:12taking time out for us today