Portfolio Pain May Be Deeper Than Headline Indices Suggest, Says Hdfc Securities, Managing Director and Chief Executive Officer Dhiraj Relli

Geopolitical tensions arising from the West Asia conflict have injected fresh uncertainty into global financial markets, raising concerns about crude oil prices, foreign capital flows, and the trajectory of corporate earnings. While the benchmark indices have corrected sharply, the damage in broader market has been far deeper, says Dhiraj Relli, managing director and chief executive officer, HDFC Securities.

In an interview with Business Standard, Relli says a sharp downgrade to India Inc’s profit growth would likely require a more sustained and severe energy shock.

Edited excerpts: 

What Will Be the Impact of the Iran War on Indian Equity Markets? Has the Conflict Upended Estimates of Broad-Based Double-Digit Profit Growth?

In the immediate term, markets are expected to remain in a risk-off mode, with foreign institutional investor outflows and pressure on the rupee. However, unless the conflict results in a prolonged spike in crude prices – particularly above the $100-per-barrel mark – the broader macroeconomic impact may remain manageable. At present, consensus expectations for double-digit earnings growth for Indian corporates remain largely intact, supported by domestic demand and strength in the banking sector. That said, persistently higher oil prices could lead to margin pressures across sectors such as aviation, paint, logistics, and chemical, while also raising inflation risks and widening the current account deficit. If crude prices remain elevated for an extended period, analysts may have to moderate earnings estimates modestly. However, a sharp downgrade to aggregate profit growth would likely require a more sustained energy shock.

What Will the Conflict’s Impact Be on the Broking Industry? How Will It Affect Cash and Derivatives Volumes? And What Will Be the Impact on Products Like the Margin Trading Facility (MTF)?

Periods of geopolitical uncertainty typically lead to higher market volatility, which tends to lift activity in the derivatives segment. In India, where index options trading accounts for a sizeable share of brokerage volumes, heightened volatility often leads to increased hedging and speculative activity. As a result, brokers may see an uptick in derivatives turnover even if delivery-based participation in the cash market slows temporarily due to investor caution. However, risk appetite for leveraged products such as MTFs could moderate in the near term. Investors generally reduce leveraged positions during periods of uncertainty, while brokers also tend to tighten risk controls and margin requirements to manage volatility. FY26 was a tough year for markets.

How Did It Play Out for the Broking Industry?

FY26 has been an average year for the broking industry. It has been challenging for the broader capital markets ecosystem, including brokerages. After peaking in September 2024, markets have largely remained lacklustre. While the Nifty delivered around 10.5 per cent in 2025, the pain in the broader market has been much deeper. If you look at BSE 500 stocks between September 2024 and the end of February, they posted a median loss of about 13 per cent. So the pain in investor portfolios has been far greater than what the headline indices suggest. At the same time, regulatory measures to curb derivatives trading have affected volumes. One positive trend has been growth in the MTF business for exposure to commodities such as gold and silver. With commodity prices doing well, investors have shown interest in gold and silver exchange-traded funds (ETFs) and have used MTFs to take positions in them. But overall, MTF volumes have also been under pressure due to weak market sentiment.

What is the Outlook for FY27? 

For FY27, the outlook appears better. Earnings growth for Nifty 50 companies is expected to improve from around 7.6 per cent this year to double digits next year, and the growth is likely to be more broad-based. That should support market activity. Valuations have also corrected, which should help improve cash market volumes and MTF activity for brokerages. However, derivatives volumes may remain subdued in the near term as the new securities transaction tax (STT) regime comes into effect. Futures trading, in particular, will become more expensive. Some intraday and low-margin trades may no longer remain viable. We estimate that derivatives volumes could see an impact of around 20 per cent, give or take.

How Will the Stt Hike, Which Is Coming Into Effect From April 1, Affect Brokerages?

Brokerages that are heavily dependent on derivatives revenue may face some pressure. Many firms will now try to diversify their revenue streams and reduce reliance on futures and options. We are already seeing brokerages focus more on the cash segment, MTF, distribution of financial products, and other ancillary services.

Do You Think the Repeated STT Hikes in Recent Years Were Unwarranted?

The government has clarified that the objective of the STT increase is to curb excessive speculation rather than raise revenue. STT collections are ₹52,000-53,000 crore, which is a relatively small share of overall direct tax revenue. Given that objective, the move appears reasonable. At this stage, I do not expect further regulatory intervention in derivatives trading unless new data emerges suggesting excessive speculation.

Have You Seen Any Shift in Retail Investor Behaviour Given the Market Correction Since September 2024?

Not markedly. Derivatives volumes have not dropped meaningfully, dematerialised additions remain strong, and initial public offering subscriptions continue to be robust. MTF activity has also picked up, particularly in gold and silver ETFs. Some investors are even asking about potential copper ETFs because they expect copper prices to rise. Young investors tend to have a higher risk appetite and view market turbulence as temporary. Over the past five to seven years, there has been a clear shift from fixed deposits and traditional fixed-income instruments towards equities and commodity-linked financial assets.