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Cogencis, Monday, Jun 5
[C] Volume growth stems decline in profit of stock brokerages Jan-Mar
By Rajesh Gajra
NEW DELHI - After a weak Oct-Dec, when demonetisation had hit volumes on stock exchanges, the March quarter could bring respite only to the brokerages that have strong institutional trade. Brokerages with a retail client base saw their profits fall once again in Jan-Mar despite a rise in trading turnover.
Cash market turnover on the National Stock Exchange of India rose 20% on a quarter-on-quarter basis to 14.38 trln rupees in Jan-Mar, compared with a 10% decline in the preceding quarter. While the gross volume generated by foreign portfolio investors rose 16%, that by domestic mutual funds jumped 31%.
Also, the turnover on derivatives segment of the NSE, which accounts for 99% of all equity derivatives trading in the country, rose 11% on quarter.
The BSE's cash market turnover, too, jumped 132% on quarter in Jan-Mar, but this could be due to bulk trades involving transfer of shares by promoters, where brokerages don't make much money.
As most of the growth in volume came from institutional traders, the two brokerage firms with strong bulk play--Kotak Securities and Edelweiss Financial Services Ltd--saw a rise in their profit in the March quarter.
The other two brokerages taken in this analysis--ICICI Securities and Motilal Oswal Securities--have a strong retail base and saw their earnings fall in the March quarter.
The data was available in the public domain for these four as they, or their parent firms, are listed on stock exchanges. The four together had 1.20 mln unique client codes, accounting for 26% of aggregate across all NSE brokerage firms.
Every investor account with a brokerage firm has a unique client code at the time of transacting on the stock exchanges.
All the four brokerages had recorded a 9-14% on-quarter fall in profits in Oct-Dec.
The Jan-Mar net profit of ICICI Securities, which is the biggest among the four and is a subsidiary of ICICI Bank, declined 6% on quarter to 830 mln rupees. This, however, was less severe than the 11% fall in net profit in the preceding quarter.
The bank did not provide revenue figures of ICICI Securities.
The other retail-oriented brokerage, Motilal Oswal Securities, saw its net profit fall 16% to 180 mln rupees in Jan-Mar. The fall in profit was more severe than the 9% decline in the preceding quarter.
This was despite the brokerage firm's revenues going up 8% on quarter in Jan-Mar.
Faring better was Kotak Securities, which has a fair sized institutional business. Net profit in Jan-Mar stood at 1.21 bln rupees, sharply higher from 850 mln rupees in Oct-Dec. Revenue was up 28% on quarter at 3.67 bln rupees.
Kotak Securities' net profit had fallen 11% on quarter in Oct-Dec.
According to a back-of-the-envelope calculation, the net profit of Edelweiss Financial Services Ltd from its broking business rose 29% on quarter to 400 mln rupees. Revenues from broking were up 12% to 2.49 bln rupees in the March quarter.
After a dismal Oct-Dec, the March quarter at least brought cheer to some brokerages, and while others with high retail base have some catching up to do in the current quarter.End

Edited by Mansi Kelkar

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