Chess, martial arts and trading: Meet FYERS‘ boss Tejas Khoday

His love for trading made him start FYERS, a brokerage firm which is focused on serious traders.

An avid chess player, Khoday likes practicing martial arts and applies skills like focus and discipline learnt from there in his investments too. He doesn’t hold more than five stocks in his portfolio. Khoday, who is the co-founder and chief executive officer of FYERS, shared his investment strategy and financial journey for the special Mint series — Guru Portfolio. Edited excerpts from an interview:

Tell us something about your education and background.

I did my master’s in finance and worked with various companies, including a brokerage firm early in my career. My father was a businessman, but he died early. I kind of grew up trying to learn the ropes of business by myself and with my brothers.

What attracted you to the stock markets?

I actually got fascinated by the stock markets when I was in high school. One day, I was flipping through TV channels and I was really curious about why the numbers were moving (referring to the ticker) on a business channel. Besides, my father had a lot of debt, so I wanted to know about the movement in interest rates. In high school, I dropped out of science and took up economics to understand how interest rates can change after you obtain a loan. That’s how I started in markets.

I was initiated in stock markets by my friend’s father who lived in the neighbourhood. He was investing in IPOs, back in 2006. I didn’t really have any money, so he gave me some money to invest. I opened a demat account and started buying infrastructure and real estate IPOs.

Tell us about your first job.

I was one of the first few employees of Zerodha in 2011. I was doing a little bit of everything, I was in customer support, risk and sales. So, primarily, I was a support staff trying to help traders place buy and sell orders.

I got a first-hand insight into how traders behaved at different times of the month, especially the trading behaviour and positions that traders take during market expiry days. I got to see that very early on when I was maybe about 22 years of age.

When did you leave Zerodha?

By 2012 or so. I was there for a brief period and then I moved on for better career prospects as a proprietary trader. My next job was with Futures First, which was a London-based prop trading firm. I traded in energy markets on NYMEX and Intercontinental Exchange, there.

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What was your investment strategy in the initial days?

I’ve always been a big fan of counter cyclical investing. I believe in the whole concept of buying and waiting out several business cycles, and that stretch requires you to get in at a time when the downside is limited, and that generally happens when the markets are looking very negative. For the long term, I believe in counter cyclical investing, and for the short and medium term, I believe in going with the momentum.

Any big trades that you remember after joining Futures First.

I had some really good trades in 2014-15, when the Indian currency moved significantly. The rupee had depreciated from 53, to all the way till 69. So, I was able to catch that trade. Also, before that, when Moody’s downgraded the US, at the time, gold had crashed. That was another time when I was able to capture the bulk of the move. Right now, I run a business that is fairly large but at that point in time, I think 15-25% of my earnings were because of these two trades.

What motivated you to start your own firm?

I had experience working at Indian brokerages, but the difference between what Indian traders were offered at platforms versus those given to global traders was very stark. I wanted to improvise on the products, and give traders far more better features. Like fintech, building software was kind of hot, so, we chose the harder route by becoming a stock broker and then providing technology, which we thought Indian traders would appreciate.

What makes you different from other brokerages?

We were the first brokerage in India to introduce drag and drop and price ladder trading. This price ladder trading is something that I had used on NYMEX when I was trading in energy markets. Basically, this enables you to trade based on price action by looking at bid offers. Casual investors were never really our target audiences to begin with. We were more focused on historical data and speed at which orders get executed. We were also one of the few brokers who popularized API trading, also known as algo-trading for retail.

FYERS has around 3.5 lakh customers, which is less than other brokerages. How happy are you with FYERS position today?

Our target audience has always been active traders. We never really wanted to be a one-crore customer company, because then the focus shifts from trying to cater to those who want to participate in the markets everyday versus to those who don’t even know about the markets. FYERS is a bootstrapped startup, and we haven’t raised any capital as such. We actually are doing fairly well in terms of trading volumes and participation because we tend to attract the most serious investors.

Can you throw some light on your firm’s financials?

In the financial year 2022, we did more than ₹108 crore in revenue. As a private company, we don’t disclose profits but I would say profits are in excess of 25% or so.

Coming to your personal portfolio, how are you invested?

I only have equity and alternative asset class in my portfolio. So, equity allocation is 70%, and Infrastructure Investment Trust (InvITs) forms the rest 30%. I am invested in InvITs as it is a dividend yielding asset class.

How are you placed in terms of market capitalization?

None in penny caps, and evenly divided between small- and large-caps and mid-cap sets. So, 50% in large- and small-caps and then 50% in mid-cap stocks.

How do you pick a stock or sector?

I pick stocks by primarily looking at tailwinds and observing if the management has the ability to capitalize on tailwind. Equity markets around the world are overvalued and it’s just a function of how much you are willing to pay for anything. I think if there is an industry tailwind, and if we see any management that is able to capitalize on that, then the chances of profiting from such investments increases substantially.

Are you still into active trading?

I would love to do so, but I don’t have the time to trade lately as I have been busy with running and scaling up the brokerage business.

How has your portfolio performed over the years?

I started the venture in 2015-16, and then we got the opportunity to start investing only after the company turned profitable. I think we need to wait it out for the next three to four years to be able to answer that question. I think short-term volatility is not something that long-term investors need to judge.

What is the strategy that has worked for your portfolio?

The strategy that has almost always worked for me is counter cyclical investing. For example, before Narendra Modi became prime minister, markets were going down because public sector banks were on the verge of defaulting in 2012-13. Mid-2013 was the worst time to be invested in bank stocks. But in November 2013, when the markets bottomed out, I thought that was the best time to invest. But there was so much bad news out there that the markets started improving only by May 2014 onwards. What has worked for me is investing when people think it’s doomsday. Another thing that’s worked is I believe in investing in the early phase of irrational exuberance.