BackBrokerage firms gain big from entry of new investors
Earnings potential of brokerages received a boost as more retail investors opened demat accountsIndia’s total active demat accounts stood at 56.9 million as of 30 April, up from 40.8 million at the end of 31 March 2020
PremiumMUMBAI : Shares of equity-market-focused financial services firms have surged in the past fortnight on expectations that their earnings will remain robust amid buoyant stock markets fuelled by increased retail participation.
Since 20 April, Motilal Oswal Financial Services Ltd advanced 22.7%, Geojit Financial Services Ltd climbed 21%, Arihant Capital Markets Ltd 16%, Emkay Global Financial Services Ltd 11.6% and LKP Securities Ltd 10%.
“We believe that the covid impact has increased the demand for financial planning, especially in the younger or millennial population. Equities are expected to play a key role in financial planning due to their long-term benefits over other asset classes. Therefore, we are expecting the growth trend in demat account opening to continue in the coming years, which will benefit those financial brokers who have technical support and strong research coverage", said Vinit Bolinjkar, head of research, Ventura Securities.
Earnings potential of brokerages received a boost as more retail investors opened demat accounts. India’s total active demat accounts stood at 56.9 million as of 30 April, up from 40.8 million at the end of 31 March 2020 and 35.9 million in 31 March 2019. Out of 16.2 million accounts opened since March 2020, around 5.4 million were opened in the past three months. A strong rally in the equity markets in the past year and new investment opportunities in the form of initial public offerings (IPOs) lured retail investors. While other asset classes such as fixed-income securities and real estate yielded lower returns, equities offered both yield and capital appreciation opportunities, according to analysts.
Besides hassle-free online account opening, dynamic trading platforms and easier access to research reports are other the key factors for higher retail participation, the analysts said.
Motilal Oswal Securities reported 86% jump in revenue for Q4, while posting a net profit of ₹448 crore from a loss of ₹254 crore last year. Angel Broking’s revenue surged 112% for Q4 while profit boosted 230%. ICICI Securities’ profit advanced 111% while revenue grew 53%. 5Paisa Capital recorded a net profit of ₹5.86 crore from a loss of ₹1.70 crore a year earlier while revenue jumped 40%.
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