Dear Sheru,

I trust you and your family are safe and keeping good health. The number of new COVID-19 cases continues to rise in India, with the country’s daily positivity rate having crossed 4% after four months. We had a couple of active cases in May and have three active cases at present. I wish them all a speedy recovery. Under the circumstances, caution remains the best policy. Sharekhan continues to work in hybrid mode in the Head Office with the staff being allowed to work from office subject to approvals. All our branches remain open and there is no restriction on attendance. All staff who are working from office are following all COVID-19 protocols. We continue to monitor the situation closely and will keep you updated about any new developments.

Coming to the last month’s report card, it shows the impact of a turbulent equity market that remained volatile in May and closed in the red for the second consecutive month. The Sensex and the Nifty declined by 2.6% and 3% month on month (MoM) respectively during the month as foreign portfolio investors (FPIs) pulled out nearly Rs.40,000 crore from the equity market during the month, the highest since the March 2020 sell-off after the announcement of a nationwide lockdown. FPIs have been selling Indian equities since October 2021 and taken out more than Rs.2 lakh crore from the equity market in 2022 so far. The Sensex has lost over 7,500 points while Nifty is down by more than 2,200 points in 2022 so far. The average daily turnover of the company from the cash market has declined by 26% in the year till date from Rs.1,750 crore in January to Rs.1,295 crore in May. The fact of the matter is our business environment has turned tough.

We are facing strong headwinds

• FPIs are getting out of riskier assets like Indian equities
• Our equity market is highly volatile and falling, investor sentiment has turned weak, clients are staying away
• The Russia-Ukraine conflict continues unabated
• Crude prices remain above $100 a barrel, even after coming off the high of $123 a barrel crude had soared to when Russia invaded Ukraine in February this year
• Inflation in the domestic economy remains high – in May 2022, the Consumer Price Index remained above 7% (well above the Reserve Bank of India’s target of 4% for the medium term) while the Wholesale Price Index climbed to a record high level of 15.9% (the highest since it touched 16% in September 1999)
• Central banks across the globe, including the US Federal Reserve and Reserve Bank of India, have turned hawkish and interest rates are on the rise
• Growth expectations have declined over the last few months and several forecasters including private forecasters, international rating agencies, the World Bank and Organisation for Economic Co-operation and Development have slashed India’s gross domestic product growth estimate for 2022-23
• COVID-19 cases are on the rise as well

So brace up. We are in for some difficult times ahead. The road ahead will be tough but let our focus on customers not drift even a little. If anything, we must take extra care of our customers as they too are grappling with uncertainties. We must educate and handhold them, unnerved that they are to see their investments losing value by the day. Half the year is over and our business is slowing down. We shall need to walk extra miles to achieve our business targets. The good news is we have successfully dealt with such challenges before. Market volatility, economic downturns and global uncertainty are all part and parcel of our business. I am confident that with hard work, perseverance, determination, and effective cost control and cost management we can withstand the headwinds.

• New client additions grew by a whopping 31% in May 2022.
• The trailing 12-month active clients count reached 757.37K by the end of May 2022.
• Close to 9.4K branch-mapped broking clients were reactivated as part of FFP in the last month.
• The net collection in the MF distribution business was positive in May 2022 in spite of stock market volatility.
• Inflows into SIP were positive, rose by 1.75% MoM in May 2022.
• For the LIC IPO that closed on May 9, 2022, we received more than 1.38 lakh applications, the highest in the history of Sharekhan.
• The deadline for APAC Fundraising Campaign has been extended to July 31, 2022.

Consistent selling by the FPIs and sour global market mood continued to dampen investor sentiment in India and the domestic stock market continued its downward journey in May 2022. This affected Sharekhan’s performance for the month. The fall in the company’s cash turnover was greater than the fall in the cash market during the month which resulted in a loss of market share. The market share in the cash segment dropped by 5% MoM and that in the futures and options segment fell by 9% MoM in May 2022. The daily client activity was down 15% as increased volatility, and concerns over the massive FPI outflows and the other developments kept clients away from the market. Consequently, the daily average broking revenue fell by 19% MoM during the month.

The good news is that our new client additions surged in the same period on the back of bigger Sales and Do-It-Yourself (DIY) teams, increased productivity and a higher number of active Business Partners. Compared with a 9% increase in the industry average monthly net client additions in May 2022, our new client additions surged by a whopping 31% in the last month. Good work, Sales and DIY teams, and Business Partners. Keep up the good performance on the client acquisition front and let us continue to handhold the customers and allay their concerns.

The Front Foot Programme (FFP) had another positive growth month in May this year. The trailing 12-month (TTM) active client count stood at 757.37K at the end of May 2022. The FFP facilitated the reactivation of almost 9.4K branch-mapped clients during the month. What’s more, the efforts of the Business Partners resulted in the reactivation of another 4.2K clients in the same period.

The trend remains that reactivations are also good for revenue growth. Close to 4.6% of the clients who got reactivated in May have also traded in futures & options already. Also, a large proportion of the reactivations have continued beyond just one or two transactions. Almost 39.1% of the reactivations that took place in May have conducted three or more transactions already. My best wishes to the entire front-line team as well as our Business Partners for the continued success. Let’s aim and plan to take this programme to newer heights. Incidentally, the FFP was relaunched as “Mission Reconnect” earlier this month but more on this in the next month’s update.

Our mutual fund (MF) assets under management (AUM) fell by 2.86% MoM in May this year to Rs.5,887 crore, reflecting the volatility in the broader equity market (Nifty was down 3% in May 2022). The gross inflow for the month stood at Rs.154 crore and the net collection was positive at Rs.23.48 crore. The inflows into Systematic Investment Plans (SIP) rose by 1.75% MoM during May to Rs.59.83 crore. The gain was, however, slower than the performance of the MF industry, which witnessed an increase of 3.57% MoM in SIP inflows during the month. The SIP contest “SIP ka Sher”, which was due to end in April, was extended to May on account of disruptions owing to the implementation of regulatory changes. Despite multiple challenges, the front-line team is showing strong resilience and spirit in supporting the MF business.

Our Exchange Margin Funding (EMF) business contracted by ~12% MoM in May due to headwinds and high volatility in the equity market. During the month, our Branch Network contributed almost 66% of the total funding with the Business Partner channel contributing the rest. We expect the performance to recover once the geo-political situation improves and market sentiment recovers.

Our Loan Against Securities (LAS) book contracted by 5% MoM in the last month. We achieved total disbursements of Rs.157.78 crore during the month. In terms of channels, the direct channel, Branch Network, Business Partners, direct selling agents and Employee Stock Ownership Plans accounted for Rs.22.86 crore, Rs.36.90 crore, Rs.2.83 crore, Rs.70.80 crore and Rs.23.39 crore of the total disbursements respectively.

A fantastic team effort resulted in Sharekhan receiving more than 1.38 lakh applications for the initial public offering (IPO) of Life Insurance Corporation of India (LIC), which closed on May 9, 2022. With the LIC IPO (the biggest IPO in India till date), we also achieved the highest number of IPO applications ever in Sharekhan’s history. We almost doubled our application count from the previous high of 68,107 applications received for the public issue of SBI Cards & Payment Services in March 2020. Furthermore, we increased our market share to 1.89% with the IPO. Not just that, over 2,000 new accounts were opened daily during the LIC IPO period including holidays.

In terms of segments, Retail contributed the lion’s share of the applications at 69% followed by Super Trader, Super Investor and Sharekhan One at 24.51%, 5.57% and 0.33% respectively. The clusters led by Nidhi Ambardar, Hemendra Agarwal and Anahita Vora were the top three in terms of the number of applications received whereas the clusters led by Channaraj KJ, Rajiv Purohit and Hemendra Agarwal were the top three in terms of targets achieved.

The performance reflects a tremendous concerted effort by Sherus from across the organisation. I congratulate the entire Branch Network, the Segment teams and the support teams including all Technology teams, and the Operations, Customer Service, Client Acquisition – Sales, Research, Brand and Communication, Digital Marketing, Do-It-Yourself, Compliance, Network Management, CRM & Data Analytics and Internal Communications teams for the achievements.

I am happy to say that the last day for participating in the ongoing APAC Fundraising Campaign 2022 has been extended to July 31, 2022 to allow every staff a chance to participate. If you have not had the opportunity to take part in the campaign yet, I urge you join it by making a donation to Goonj, our non-government organisation partner. Donate whatever you can, remember every rupee counts. Pledge your donation today by clicking the following link: https://www.surveymonkey.com/r/8FTHCM5. Know more about the fundraiser by clicking this link: https://www.sharekhan.com/MediaGalary/Newsletter/
APAC-FundRaising-020522-web.html.

Given that the number of COVID-19 cases are rising again, we need to continue to follow the COVID-19 protocols as much as we can. Maintain social distancing, wear a mask when in crowd, wash your hands frequently, keep rooms well-ventilated and cough away from others into your elbow to stay safe. If you still have not vaccinated yourself against COVID-19, we encourage you to get yourself vaccinated as soon as possible, as vaccination can help protect you from getting the disease. Besides, some state governments have mandated that only fully vaccinated staff should be allowed to work from office and that each staff must submit his/her final COVID-19 vaccination certificate to his/her employer. Whether one is working from office or home, each staff must, therefore, upload his/her final certificate on ShareKonnect, our Human Resource Management System. The Human Resources team has already communicated to all staff how to do it. Don’t wait, upload your final COVID-19 vaccination certificate today. Please continue to take care of yourself and your loved ones, stay safe.

Thank you.

Best regards,
Jaideep Arora
Director and Chief Executive Officer,
Sharekhan