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Breaking Broking Barriers

Syed Firdaus Ashraf in Bombay

Come May 17, Motilal Oswal Securities, a leading stockbroking house in Bombay, will advertise its services on satellite television channels STAR and CNBC. Never before has any stock exchange-related activity been advertised in India: this marks a new chapter in the annals of the Indian capital market.

Says S Oswal, managing director, Motilal Oswal Securities, "Brokers in our country always had the best of both worlds. They never bothered to reach out to the people and educate them about the stock markets. We wish to change all that. We want to reach out to the common man by every mode of communication."

The firm is also planning to reach out to the retail investor. It has already launched its own Website to educate the masses about the stock market. The site offers live quotes from the Bombay Stock Exchange.

By 2000, Oswal plans to launch electronic broking. "It's the future," he says. "In the Western countries, stockbroking is also done on the Internet. Nearly 25 per cent of the business is conducted on the Net. We expect the same thing to happen in India too in the coming years," says Oswal.

At present, in India, trading in stocks on the Net is not legal in India. For that to happen, permission from the Reserve Bank of India and other market regulators is mandatory.

"We already accept orders from our customers via e-mail as there is no law in India which says that one cannot use e-mail for accepting the stock orders," says Oswal.

Perhaps it is in the fitness of things that Oswal, who started his broking business in a suburban hostel in the early eighties with his partner Ramdeo Agarwal, now a director in the company, should herald a new era in Indian stockbroking. All along, Oswal and Agarwal never ceased to innovate while delivering their services to the investors.

It was a chance encounter -- a lift to the railway station -- that brought them together. Pleasantries led to friendly talk on each other's interests, and then friendship struck root.

Oswal always wanted to be a good broker on the stock exchange. Agarwal wanted to do more than just equity research. The two teamed up and a modest beginning was made in a 100 square feet office -- there was only a telephone, a table and small volumes of stocks for trading -- in central Bombay.

"But more importantly, we had a desire to make it big in life," recalls Oswal.

Today, he operates from a plush office in South Bombay's Nariman Point, one of Asia's costliest business districts.

Membership of the BSE was bought with borrowed money. The business generated from that saw them grow from a single membership outfit to a full-fledged stock broking firm allied to the Bombay Stock Exchange, the National Stock Exchange and the Over The Counter Exchange of India.

As the time passed, the client base also saw a marked shift from individuals and upcountry businesses to more corporate and institutional businesses.

The company's philosophy is based on the fact that no one is immune from change.

Motilal Oswal Securities believes in empowering its investors with research findings. The company has a dedicated team of researchers that studies a large number of companies, offers guidance and recommendations, but leaves the buy/sell decisions to the investors themselves.

"We have noticed that in the stock market, investors are not aware of advice based on equity research. That's why we offer it to retail investors," says Oswal.

He believes the key to success in the stock market is research. His company spends about 15 per cent of its revenues on research.

Asked about promoters who vanish after raising money from the public, Oswal says investors are to blame. More often than not, they rely more on friends or acquaintances's advice than the broker's. Small wonder, so many of them have lost and continue to lose money. The significance of research-based decisions cannot be over-emphasised, he reasons.

Motilal Oswal Securities grew by 123 per cent in 1997-1998 and by a phenomenal 250 per cent in 1998-99. Oswal attributes the performance to the continuing support of his research-happy patrons.

"Dematerialisation coupled with the Internet will change the face of stockbroking as we know it today," says Oswal.

"You can be sure the change will be positive and the biggest beneficiaries will be the clients. Execution will become more transparent and more efficient. Volumes will explode. The future poses a challenge like never before and someone will come up trumps. But who this winner will be is the big question to answer," he says.

According to Oswal, the winner will be one who will be able to harness technology and research to serve the client better.

How does he view the notion that the broking community is not often an honest one? "Yes, this was the feeling earlier. But now the system has become very transparent after the dematerialisation of the shares. So, the negative feeling has evaporated," he says.

Oswal plans to tie up with like-minded stock-brokers in 20 cities. These alliances are expected to attract small investors in large numbers and increase the volume of business. "At present, we have channel partners in Ahmedabad, Calcutta, Durg, Jabalpur, Nagpur and Surat. We hope to expand to many cities," he says.

Photograph: Jewella C Miranda

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