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Bank brokerages to continue reporting strong performance: Report

Published

4 years ago

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The domestic capital markets continue to remain on an upward trajectory after a strong performance in FY2021.

The average daily turnover (ADTO) increased to Rs 27.92 lakh crore in FY2021 from Rs 14.39 lakh crore in FY2020, registering an annual growth of 94 per cent. Transaction volumes remain strong in the current fiscal, with the markets clocking an ADTO of Rs 56.36 lakh crore in H1 FY2022.

As per ICRA, the market performance has been supported by favourable liquidity in both domestic and international markets, optimism related to a recovery after the graded reopening of the economy, progress on vaccination rollout and steady retail investor momentum.

Throwing more light, Samriddhi Chowdhary, Vice President & Sector Head – Financial Sector Ratings, ICRA says, “The pool of ICRA-rated bank brokerages reported a strong performance in FY2021 with the estimated average daily turnover (ADTO) increasing 28 per cent Y-o-Y to Rs 1.51 lakh crore from Rs 1.18 lakh crore in FY2020, led by the healthy growth in the retail segment.

Despite the changes in the margin requirements, the performance remained healthy in Q1 FY2022 with an estimated ADTO of Rs 1.64 lakh crore, driven by favourable retail investor sentiment. However, the market share of the sample pool of ICRA-rated bank brokerages in terms of transaction volumes declined in FY2021 and moderated further in Q1 FY2022 as they continue to lose share to discount brokers.”

Bank-brokerages reported a strong uptick in earnings in FY2021 registering a year-on-year (Y-o-Y) growth of 40 per cent in total revenues and 80 per cent in profit after tax. The cost structure and operational efficiency of the bank brokerage companies also improved over the past few years with focus on the rationalisation of branches coupled with cautious efforts towards the transition to a digital business model, thereby improving the operational efficiency across brokerages.

Bank-brokerages have been increasingly looking at other non-broking sources of income, namely capital market lending business, distribution income and investment banking revenue. Bank-brokerages have significantly scaled up the margin funding business over the past fiscal, moving in line with the capital market rally, which has resulted in an increase in their borrowing level.

The retail broking segment has witnessed a significant disruption in the last few years due to the growing prominence of discount brokerages. The competitively priced offerings of discount brokers and the no-frill basic accounts and services have resulted in the realignment of the pricing strategy across the industry.

Adds Chowdhary, “apart from attracting clients from full-service providers, discount brokerage houses have helped expand the market by bringing on board a large number of first-time investors. While the market share for bank brokerages in terms of active clients moderated in FY2021, primarily owing to the faster scaling up of the discount brokerage houses, they reported a strong performance as reflected by the healthy operating metrics and surge in earnings.”

ICRA expects bank brokerages to continue to build their retail franchise and focus more on technology and digital models for customer acquisition. Supported by these factors, bank brokerages are expected to register a healthy growth in client addition as well as transaction volumes, though their share in total active clients would moderate owing to the rapid expansion of the discount broking model. The blended yields are expected to compress going forward, though the focus on fee and fund-based income would support the profitability.

Adds Chowdhary, “Bank brokerages are expected to continue to enjoy better brand recall, trust, higher credibility and financial flexibility by virtue of being a part of banking groups and would, therefore, remain a prominent part of the industry value chain. Bank brokerages are also increasingly looking at the emerging demographic opportunities and new geographical base, which is facilitated through online channels. Going forward, the ability of the bank brokers to effectively ramp up their digital initiatives, attract millennial clients and expand to a newer geographical base such as Tier II and Tier III cities would be critical.”

ICRA expects the net operating income (NOI) of bank brokerages to grow 20-25 per cent year-on-year (Y-o-Y) in FY2022 supported by steady broking income along with an uptick in the margin funding and distribution businesses; the ramp-up of other capital markets related businesses could further support the earnings profile. The net profit for bank brokerages is expected to grow 17-20 per cent during the same period.

The borrowings levels of bank brokerages are expected to increase in the current fiscal to support their margin funding business. The gearing levels of bank brokerages are expected to be in the range of 1.5-2 times in FY2022 at an industry level while the gearing across entities would vary between 1 to 3 times based on the scale of margin funding operations.

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Business

Sensex, Nifty open marginally lower amid mixed global cues

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16 hours ago

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September 19, 2025

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Mumbai, Sep 19: The Indian benchmark indices opened marginally lower on Friday, with IT stocks leading the losses in early trade.

As of 9.26 am, Sensex was down 241 points or 0.29 per cent at 82,772 and Nifty was down 63 points or 0.25 per cent at 25,360.

The US Federal Reserve resumed interest rates cut cycle by reducing rates by 25 basis points but the outlook on further easing in the months ahead failed to meet the investors’ dovish expectations, while markets awaited more cues into US policy path, according to analysts.

Nifty Midcap 100 inched up by 0.16 per cent, and the Nifty Small cap 100 lost 0.04 per cent.

Hero MotoCorp, Shriram Finance, Maruti Suzuki, NTPC, Tech Mahindra were among major gainers on Nifty, while losers were ICICI Bank, Bajaj Finance, Tata Consumer and Titan Company.

Among sectoral indices, Nifty IT, the top loser, lost 0.40 per cent. Nifty FMCG and Nifty Private bank also weighed down on the indices. Except Nifty Realty and PSU Bank all other sectoral indices were trading in the red or with marginal gains.

The Nifty50 held firmly above the 25,400 mark in the previous session, signalling investor confidence with upside momentum intact.

Analysts said that while buying interest is visible at lower levels, the 25,500–25,600 zone remains a stiff hurdle on the upside. On the downside, support is placed at 25,300–25,100 for any minor pullback.

“Market is on an uptrend and is well positioned to set new records soon. Fundamentals, technicals and sentiments are favourable for a steady uptrend. Earnings are likely to improve from Q3 onwards. Technically, short covering is happening and can accelerate,” said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

From the market sentiment perspective, a US-India trade deal without the penal tariff and a lower reciprocal tariff is likely, he added.

Major US indices made gains overnight as the Nasdaq added 0.94 per cent, the S&P 500 edged up 0.48 per cent and the Dow inched up 0.27 per cent.

Most of the Asian markets were trading in the green during the morning session. While China’s Shanghai index dipped 0.12 per cent, and Shenzhen advanced 0.23 per cent, Japan’s Nikkei edged up 0.77 per cent, while Hong Kong’s Hang Seng Index moved up 0.12 per cent. South Korea’s Kospi lost 0.46 per cent.

On Thursday, foreign institutional investors (FIIs) purchased equities worth Rs 366 crore, while domestic institutional investors (DIIs) were net buyers of equities worth Rs 3,326 crore.

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Business

Stock market rises for 3rd consecutive day on US Fed rate cut, buying in IT sector

Published

2 days ago

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September 18, 2025

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Mumbai, Sep 18: The Indian equity indices extended the gaining momentum for the third consecutive session on Thursday amid buying in IT stocks after the US Fed announced a rate cut.

Sensex closed at 83,013.96, up 320.25 points or 0.39 per cent.

The 30-share index opened with a decent gap-up at 83,108.92 against the last session’s closing of 82,693.71 after the US Fed announced a rate cut. However, the index remained range-bound throughout the session amid a mixed approach across sectors except IT.

Nifty ended the session at 25,423.60, up 93.35 points or 0.37 per cent.

“Global equities traded in the green after the U.S. Federal Reserve cut rates by 25 bps to 4–4.25 per cent and signalled two more reductions this year to cushion rising job market risks. Mirroring the upbeat global sentiment, Indian markets opened with a positive gap-up and maintained a sideways trajectory through the first half of the session,” Ashika Institutional Equities said in a note.

Eternal, Sun Pharma, Infosys, HDFC Bank, PowerGrid, HCL Tech, ITC, Hindustan Unilever, Tata Steel, Axis Bank and Bajaj FinServ settled high amid the Sensex stocks. Bajaj Finance, Tata Motors, Trent, Ultratech Cement, and Asian Paints ended the session in negative territory.

The majority of sectoral indices remained in green amid value buying. Nifty Fin Services jumped 135 points or 0.51 per cent, Nifty Bank rose 234 points or 0.42 per cent, Nifty Auto moved up 34 points or 0.13 per cent, Nifty FMCG jumped up 201 points or 0.36 per cent, and Nifty IT surged 303 points or 0.83 per cent.

Broader indices continued their bullish run amid buying in midcap and small-cap stocks. Nifty Small Cap 100 jumped 53 points or 0.29 per cent, Nifty Midcap 100 increased 224 points or 0.38 per cent, and Nifty 100 ended the session 91 points or 0.35 per cent high.

“Rupee closed weaker by 0.26 at 88.09 despite the dollar index staying soft post-Fed policy, where a rate cut was announced but forward guidance remained mixed as the roadmap for further cuts was unclear and data-dependent on jobs,” said Jateen Trivedi of LKP Securities.

The rupee failed to gain as FII sentiment remained cautious, while ongoing India-US trade talks will be the next key trigger. Support for the rupee lies near 87.75, while resistance is seen at 88.25, he added.

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Business

Fed Finally Cuts Interest Rates, But What’s Next For India’s Markets & Gold Prices?

Published

2 days ago

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September 18, 2025

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Mumbai: The US central bank (Federal Reserve) has cut interest rates for the first time in 2025. This step is expected to support the US economy. Fed Chairman Jerome Powell said the decision was not due to political pressure, even though President Donald Trump had been demanding a rate cut for a long time.

The Fed has also hinted that it may cut rates two more times this year. This is to help the weak US job market. In the recent two-day meeting, almost all Fed members supported the 25 basis points cut. Only one member, Stephen Miran, voted against it.

Stephen Miran works with the White House and was earlier Trump’s economic advisor. He wanted a bigger cut—50 basis points. Trump had promised rate cuts during his election campaign.

New interest rate: 4 percent to 4.25 percent

Repo operation rate: 4.25 percent

Interest on reserve balance: 4.15 percent

Reverse repo rate: 4 percent

Prime credit rate: 4.25 percent

This US rate cut could help Indian markets. Lower US interest rates may push foreign investors to invest in India for better returns. This could lead to growth in the Indian stock market.

Gold may also get a boost. When interest rates fall, investors often look for safer and better returns—like gold. So gold prices might rise further.

The US job market is still weak. Looking at this and other economic risks, more rate cuts may happen in the coming months.

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