Enough and more has been done about what has led to this collapse of the bank. Let us connect the India dots here. What does this mean for India?
There are two things; if we look at the earlier crisis which happened in 2008, that was definitely a credit event. This is an asset liability mismatch issue. And asset liability, we are really surprised that how this is being done in such a manner. There is a huge-huge asset liability mismatch. When we look at India and Indian banks, I think our regulators are doing a great job and there is no such big asset liability mismatch in Indian banks. That is number one.
Number two, as far as credit is concerned, our position has improved over the last nine to 12 months. It has improved much better. The Indian businesses are doing so well. Most of the delinquencies which are there, people have already paid back or are ready to pay back. They are working towards that. All those things are favouring our economy.
I do not think there will be much impact. But yes, when an economy like the US is in trouble, it has an impact everywhere. It is impacting our equity market also but of course, equity markets– it was always being said to be overvalued, and a trigger was required for the correction to happen. So, enough has happened. Whatever needed to happen and we have got fair valuations now. I think the future is quite bright from here.
When the subprime crisis hit us, it was in 2007. The term financial experts used that time was decoupling, that what is happening in the US will not happen in India because the economies are decoupled. I understand that in theory we are decoupled. But when there is a leverage unwinding in the world, the decoupling becomes re-coupling. So is not that a valid fear?
It’s again a re-coupling to decoupling kind of thing. Earlier it was decoupling to re-coupling but when we look at what is happening in India, how our institutions are working, how things are better, I think we are actually decoupled. I will not say that re-coupling is happening, but see we are a global economy now. So being 100% decoupled is impossible. Indians also are investing outside India. What is happening in the US is affecting Indian investors also.
Also people all across the globe are looking at India also. From the equity side, our valuations have come down a bit and we are near the fair valuations. There are still some stocks which are very costly but a good, respectable correction has happened. So we should not be worried about it.
Indian markets frankly have given no returns from the last 18 months now. The positions are light, the retail volumes are down 40-50% because no one has made money. Do you think the silver lining in this global sell-off is that the market positioning was very light and no one has the money, to put it simply?
Yes, that is right. But people have not put any additional money. The people who were putting money earlier, are still sitting on profits. There is no return in 18 months and even the money inflows are very low. As for SIP investors, since they are putting in long term for 5 years or 7 years, they are actually averaging. So it is good for them. The rupee cost averaging is actually happening in a practical way.
That is what I am saying and this is the global success story. The Indian SIP story is like a UPI. Nowhere in the world, wherever we go, whenever we go to our joint venture partner or any other geography, this SIP story could not be exploited. But we have been able to do that and still it is growing. I think most of the investors are not in a very bad situation. That is exactly what happened in the last one and a half years. Not a lot of bets have been taken on the market. So it is only on the numbers. Optically, it is looking that people have lost a lot of money, but valuations have come down.
There is one net number of SIPs which is a heartening 13,000 to about 15,000 depending on the month you are looking at. January looked good. My question is what is the trend within SIPs which is that our new SIP is getting added or are existing folks cancelling but since new investors are coming, the net number looks good?
Yes, you are right. The earlier SIP numbers are getting stopped. Some SIPs are getting more money but earlier it was like a campaign, SIP, SIP, SIP. Now it is the quality of numbers which will matter because if you look at it, five years ago also, the average ticket size was between Rs 2,000 to 2,500. Even now with the per capita income going up three times in the last 10 years, our SIP ticket size is still Rs 2,500 to 3,000. So that is something where we have to reach out because that narrative has not been given to the market.
I think a lot of education is required. The ticket size has to move up from the existing $25 to $30 in dollar terms to $100. The moment we do it, and that is possible as a lot of people have surplus money, they are not putting the money the way they should be putting money. So I think if the ticket size is taken care of then this number will from the existing number of say around 1.7 billion, it is really-really possible to make it 3 billion.
Why is the SIP not going beyond T30? If I look at the concentration of the SIP data, 60% to 65% of the deposits are still coming from T25 or T30 cities, why is that?
No, it is not that. I think we have to decode this data. Whatever we are getting from T30 are really SIPs and when we look at the T30, it includes STPs also and people put in a lot of money in liquid funds or savings funds and then the chunky amount of say Rs 5 lakh, Rs 10 lakh, Rs 20 lakh per month they are moving to equities. So that is taken care of.
Second, if you look at it, 60% of AUM is still from the top cities so it is in the same line. But when I look at SBI Mutual Fund numbers, we are getting more than 50% from T30.
Somehow SIPs are not reaching every pin code in India. Maybe it is the interest or it is the comfort or it is the technology?
Demat account opening, irrespective of whatever the experts have been saying, has been done in a different manner. One of course is technology. Second, when it was done by the fintechs in a manner where people were incentivised just to open the demat accounts. Millions of accounts have been opened where there is no activity at all.
I do not look at demat account numbers because if I look at the data which is being shown, then 95% of the people opened demat accounts and put in money. They have burned their fingers because they did it just for the heck of it. Second, things should be easier but sometimes too easy a thing also creates a problem. The youngsters are just sitting on their laptops and uploading their Aadhaar card and opening demat accounts.
Whether they are using it or not that is a different story. You have to have a disciplined approach towards SIP, you have to put in money every month. It will be triggered, it will go from your account. If I take the example of my own son, he must have opened five demat accounts. He said somebody told and so he just opened.
Did he open one with SBI also?
No, no, of course, that is by default it is there because he cannot actually trade. He cannot do anything as a student. But still he had opened the accounts.
The numbers may look high but it is not an active account.
They are absolutely inactive accounts.
