Mumbai: Indian brokerages are likely see their January-March earnings halve from the previous quarter, mirroring the sharp fall in trading volumes in the equity market, officials said.
The average daily derivatives turnover on National Stock Exchange dipped to Rs456 billion ($11.4 billion) in March from Rs670 billion in December, according to the NSE website.
The average turnover in the cash segment of NSE fell to Rs140 billion at the end of March from Rs193 billion.
“It (the impact) would be in line with the market volume, so the market volume has come down by 50%, the broking volume will come down by 50%,” said Rashesh Shah, chairman of Edelweiss Capital.
There will be decline in the earnings on a quarter-on-quarter basis, but on a year-on-year basis the earnings will be very high and could be five times higher than last year, said Motilal Oswal, chairman of Motilal Oswal Financial Services.
The Sensex has shed more than 22% during the first three months of 2008.
Spreading to contain
“We don’t use these huge rises in the market as the basis for making a future projection,” Amit Majumdar, executive director, Angel Broking, said when asked about his expansion plans.
Angel Broking’s average daily trading volume has come down to Rs20 billion against Rs35-40 billion earlier, he said.
However, the revenue impact would not be so high as many clients have switched to delivery-based trading, he added.
“The market has moved from unsafe hands to safer hands, which means it has moved from F&O (futures & options) based business to delivery based business.”
“So, though its a Rs20-billion business, the brokerage rate is higher as delivery charges are higher, so you tend to break even,” Majumdar said.
Indian brokerages have been rapidly expanding their services and reach to tap the huge potential in smaller towns and cities.
India has 193 broking firms with terminals in more than 100 cities and 25 of them have more than 1,000 terminals each, advisory firm Dun & Bradstreet said in a report.
They are also diversifying their income stream by distributing third-party financial products like mutual funds, insurance products and earnings fees from them.
“I think overall market volumes are down but most of the brokerage outfits have diversified beyond brokerage,” said Shah.