This article was published on 7th April, 2021 on LinkedIn, after which the share has given more than 101% return till now. The link to the article is posted above.
Many of the investors in our community have same the question in their minds. Since markets are in uptrend, which is the best sector to bet on for the next upcoming decade. Although, I am not a SEBI registered adviser till yet to make recommendations, but here is my sneak peek to this unavoidable question.
As per an article by IIFL securities, out of 1.3 billion population only 18 million people invest in equity markets, which is less than 2% of the total Indian population. This is likely to grow to over 5% by 2040. Covid-19 has helped in boosting investor base in India. As per Nithin Kamath, co-founder and CEO of the largest online broker Zerodha, before Covid 19, the firm was adding 70,000 to 1 lac new customers a month. However, this number immensely increased to 1.5 lac to 2 lac a month post March 2020 global market crash - an increment of almost 100% customer base.
On basis on the above mentioned facts and figures, the sector which is the most benefited or going to benefit as India transits from a developing country to a modern developed country, is the Fintech services or data driven sectors. And one may easily figure out that the increase in trading and investment interest will benefit none other than the companies like CDSL(Central Depository Services Limited). Central Depository Services Limited (“CDSL”) was founded in 1999 to fulfil one goal: Convenient, Dependable and Secured Depository Services. It is Market Infrastructure Institution (MII) and a crucial part of the Capital Market structure, providing services to all market participants - Exchanges, Clearing Corporations, Depository Participants (DPs), Issuers and Investors. A Depository is a facilitator for holding of securities in the dematerialized form and an enabler of securities transactions.
Whenever a demat account is opened with a broker or a security transaction is done, CDSL is the big fish behind it. Lets look at some statistics supporting the rise of CDSL as the big fish in Indian trading fraternity. Moreover with the brilliant performance of startups such as Zerodha, Groww and upstocks in Fintech services, financial investments are on a roll in India.
See the staggering growth in the number of demat accounts opened in last 15 years via CDSL. And this trend will exponentially increase as more percentage of population will be involved in investing and trading. The paranoia among Indian middle class for considering equity markets as a serious money minting instrument has started to diminish. And as a result, more and more youngsters have started to flood the market. As per Nithin Kamath (co-founder and CEO-Zerodha), these investors and traders are not speculative, instead they are highly intelligent and want to learn and grow in markets.
CDSL saw a massive growth of 64% y-o-y in revenue in last quarterly results. PAT increased from 14 crore to 43 crore, which is a massive 207% increase y-o-y. With the focus of government on Digital India and with onset of new startups coming up for IPOs, India is going to witness a massive growth in financial investors and traders. The new India and ongoing decade belongs to new aggressive traders and intelligent investors. Considering these factors and expected economic growth that India is going to witness, buckle up your seat belts for an incredible growth journey for CDSL.
CDSL stock price has surged a massive 317% from March 2020 lows. Now technically 500 will act as the base support which was the previous ever time high. Now stock is trading at all time highs. I feel this is just a start and a lot of steam is still left in this stock. No wonder this is a dream run for Indian equities but stocks like CDSL is a pure gold to invest for the ongoing decade.
*Disclaimer- The above mentioned article is just for educational and research purposes. I am neither a SEBI registered advisor or broker nor I have any financial relations with CDSL. This is not a financial or equity recommendation.
Target done - more than 100% achieved. Now buy for long term when consolidates to 1030 -1100 range from current levels of 1500.