A Nation of Young Gamblers
The share of young intraday traders has grown to 48% in FY23 as compared to 18% in FY19, says a new report released by SEBI
On Episode 350 of The Core Report, financial journalist Govindraj Ethiraj talks to Chandrajit Banerjee, director general of the CII (Confederation of Indian Industry) as well as Ronald Siyoni, Associate Vice President at Sharekhan by BNP Paribas.
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SHOW NOTES
(00:00) The Take: A Nation of Young Gamblers
(05:48) Markets hit highs, turning jittery
(07:20) Oil prices are down, now around $80 a barrel
(07:56) How is industry viewing the Government’s moves to boost jobs and create internships
(17:37) Why it's not all rosy in India’s cement industry
(27:28) Spotify stocks surge after record net profits and strong growth in paying subscribers
NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.
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Good morning, it's Tuesday, the 30th of July and this is Govindraj Ethiraj headquartered and broadcasting and streaming from Mumbai but right now in transit.
A fresh reminder, I am travelling and thus will be intermittent or have short episodes for the two days.
THE TAKE: A Nation of Young Gamblers
Some 1 in 3 individuals who trade in the equity cash segment, trades intraday or the same day.
The share of young intraday traders (age less than 30 years) has grown to 48% in FY23 as compared to 18% in FY19, says a new report released by the Securities & Exchange Board of India.
On top of this, the share of ‘Very Small’ traders (annual intraday turnover less than Rs. 50,000), increased to 56% in FY23 from 27% in FY19.
And here is the rub.
Some 7 out of 10 individual intraday traders (71%) in the equity cash segment incurred net losses in FY23.
Proportion of loss-makers increased further to 80% for traders with very frequent trading activity.
And finally, the percentage of loss-makers for younger traders (age less than 30 years) was higher (76% in FY23) as compared to other age groups.
There is much more granular information on this, but most of it points to what you would have intuitively concluded, there is a large proportion of young people in the stock markets who are effectively gambling and also losing money.
The fact that they are less than 30 would also suggest that many of them have joined the stock markets in the last 4 or 5 years, at least a majority, which in turn fits with other anecdotal and real data on the big jump in speculative investments during and following Covid19.
While we are talking about equities, we have seen similar bumps in other areas like bitcoin.
Elsewhere, the Reserve Bank of India (RBI) has said it is monitoring loans with a ticket size of up to Rs 50,000 on the books of banks and fintech lenders.
A majority of consumers in this segment services three “live” loans, and it is suspected this could be an indication of evergreening with the possibility of diversion into capital markets, the Business Standard reported.
Earlier, the RBI in November last year asked regulated entities (REs) to review their exposure limits for consumer credit and put in place board-approved limits for various sub-segments, specifically unsecured consumer credit exposures.
While no sizing study has been done on this segment of loans, data from the Fintech Association for Consumer Empowerment shows runaway growth in such offerings given, no surprises for guessing, by new-age fintech lenders.
Or to put it simply, the easier it is to take a loan through a swipe on your smartphone, the more people will borrow. As they are.
How big is this segment? Well, bigger than you perhaps thought.
In FY24, loans given out by such firms had topped a whopping Rs 1,46,517 crore, up by 49 per cent year-on-year and spread over 10.19 million accounts (up 35 per cent).
And the interest rates are obviously high. Similar to credit cards
Loans are now priced at 30 percent levels per annum and tenures range between three, six and 24 months.
The overall portfolio-at-risk for 90-days past-due has improved since FY22; and in FY24 fell to 3.5 per cent from 3.6 per cent in September 2023.
There is no sign at least from the numbers that something will blow up but it does not have to.
People may service their loans eventually by borrowing from elsewhere or selling some assets.
Of course people are also trading stocks and potentially borrowing for it because they are fighting inflation and rising cost of living on one hand and steady incomes and of course rising aspirations. For example smartphones, of which some 75% are financed when bought.
The larger point is that this also makes it an anxious generation which is now releasing the perils of indiscriminate borrowing and then playing with those funds in speculative instruments.
Even if the funds for the speculative investments were coming through incomes or elsewhere, it is still a loss for many as the data shows.
This is not a productive use of time either for India’s youth, apart from the fact that many are starting their lives possibly in debt and stress.
My sense is that the threat and concern is not so much the system because the RBI and SEBI, for that matter, are alert to the problem and hopefully they will keep tightening the screws as they are.
The concern is that we are fostering a nation of gamblers.
The Markets Wait For Signals
The stock markets on Monday opened at record highs, benchmarks Sensex, and Nifty lost momentum during the second half and settled on a flat note on Monday.
The BSE Sensex settled at 81,356, up 0.03 per cent or 23 points. The index hit an all-time high of 81,908.43 during early trade.
The NSE Nifty50, on the other hand, ended at 24,836, up 0.01 per cent or 1 point. The index soared to a record high of 24,999.75, merely 0.25 points shy of 25,000.
Market participants are getting jittery with the Nifty rising to 25,000 points as valuations are high after a strong session on Friday, analysts told Reuters, adding that the strength in the mid-cap stocks shows that the overall market sentiment remains positive.
India's small- and mid-cap indexes outperformed the blue-chips on Monday by rising about 1% each. The mid-caps notched a record closing high.
Meanwhile, while the IPO boom is on,
The Securities and Exchange Board of India (SEBI) is returning draft papers of initial public offerings (IPOs) to merchant bankers citing reasons for the lack of due diligence or disclosures, a strong signal to the investment bankers community, Moneycontrol reported on Monday.
Oil Prices Down
Meanwhile, in what must be good news for India which is otherwise facing a higher oil import bill as Russian oil discounts are going away, crude oil prices are now around $80.2 a barrel.
Bloomberg said oil has been trading near a six-week low as positive Chinese economic data and renewed tension in the Middle East were overshadowed by doubts over global demand.
Brent futures were little changed below $81 a barrel, following a third weekly decline.
Despite the upbeat signals for consumption from Beijing and potential dangers to supplies in the Middle East, sentiment in the oil market remains subdued.
Earlier this month, China reported its weakest economic growth in five quarters, while oil import volumes have faltered amid the slow return of refiners from maintenance.
Will The Government’s Moves To Create Jobs Pay Off
The Union Budget recently had a slew of measures aimed at job creation, including incentives to both employers and employees based on their provident fund contributions for the first four years of employment.
There are similar incentives for additional employment and then, for internships targeting the top 500 companies who will have to offer an internship and use their corporate social responsibility funds to pay for it.
The idea of internship in principle of course is a good one and much of industry and academia are already aligned on this for some years now.
The scheme is targeting 10 million youth so operationally, this might present some challenges.
The larger thrust of job creation and internships as a route to that through a mix of incentives and some nudges is possibly one of the approaches to address the larger jobs challenge.
I reached out to Chandrajit Banerjee, director general of industry body, CII or Confederation of Indian Industry.
I began by also asking him what was his one major takeaway from the recent Union Budget.
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Cement Industry, What Is Going Wrong
In our discussion on the consolidation of India’s cement industry yesterday, we noted that there is a large gap between production and capacity.
India has an installed capacity of around 600 million tonnes but production was only 391 million tonnes as of last year, as per data via the Ministry of Commerce.
The latest numbers are a little different, including the fact that some of the capacity is not usable or functioning and thus reflect around 78% of total capacity utilisation.
On Monday, the managing director of India Cements, which is being fully acquired by UltraTech belonging to Aditya Birla Group, said in a speech to employees that a price war by competitors can crush the company, possibly as the rationale behind selling out.
Addressing a team of 300 select employees, the 79-year-old veteran was probably saying goodbye to his 55-year-old career in the cement industry, with so many ups and downs too. However, he assured them that there is "no need for anybody in India Cements to feel insecure or threatened."
The other problem for India Cements was, in his words, the company’s inability to sell its land parcels to tide over a financial crisis, acknowledging also the higher cost of production and the steps taken to reduce our costs.
The company has about 26,000 acres in Andhra Pradesh and Tamil Nadu, and the plan was to monetise the surplus land to cut down debt and for capital expenditure.
"We had taken all steps to reduce our cost and we were also relying on an investor to purchase a significant amount of land we own, which would have alleviated many problems. But that did not happen, and therefore, we reverted to the solution we had considered earlier, which is selling the company," Srinivasan said. According to sources, the company's total debt stands at around Rs 2,500 crore.
India Cements was set up in 1946 and after acquiring the Coromandel Cement plant at Cuddapah in 1990, became the largest producer of cement in South India.
The first successful hostile takeover in India was also done by the company when it acquired Raasi Cements in 1998.
I reached out to Ronald Siyoni, AVP at Sharekhan by BNP Paribas and cement analyst and began by asking him how he was seeing the gaps in demand and capacity and how that was affecting the financial standing of cement companies before moving on to overall demand and price projections.
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Spotify Surges
No, they don’t pay us but they do host us free of cost and help us reach you.
Not surprisingly, would you say, Spotify Technology SA shares hit a 3-year high after the Swedish audio-streaming giant reported a record profit in the second quarter and strong growth in paying subscribers.
Operating income in the second quarter was €266 million ($288 million) after a loss of €247 million a year earlier, with gross margins of 29.2%. Earnings were €1.33 a share, beating analysts’ estimates.
Paid subscribers increased 12% from a year earlier to 246 million, also beating the average analyst estimate compiled by Bloomberg. Monthly active users jumped 14% to 626 million.
Ek pointed to updates that helped the platform become “stickier,” including splashy features that hinge on fan interaction with creators, as well as automation. The CEO highlighted countdown pages, which enable users to bookmark upcoming audiobook releases, and the rollout of Daylist, an algorithm-driven, constantly changing personalised playlist.
