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Bank brokerages to continue reporting strong performance: Report

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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.

Business

Is Market Correction Over? Sensex Soars By Over 1,900 Points; Nifty Gains Over 2%

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The marquee indices closed with monumental gains as Dalal Street recovered with some requisite optimism ahead of the Maharashtra state election results on November 23.

Indian Markets Close With Bumper Gains

On Friday, November 22, the marquee indices closed with monumental gains, as Dalal Street recovered with some requisite optimism ahead of the Maharashtra state election results on November 23.

The BSE Sensex closed for the day’s proceeding with some big numbers. The oldest index in Asia closed with gains of a colossal 1961.32 points or 2.54 per cent. This took the overall value of the index to 79,117.11.

The situation was equally euphoric at the National Stock Exchange. The NSE Nifty closed at 23,830.90, having gained 481.00 points or 2.06 per cent.

In addition, the Nifty Bank index also made gains of over 1.5 per cent. Thebanking index closed with gains of 858.50 points or 1.70 per cent, pushing it beyond the coveted 50K mark, propelling it to 51,231.40.

Gainers and Losers

The days went exceedingly well for most listed companies, the day closed with a green wall. At the BSE end, SBI, Titan and TCS were the biggest gainers with all of the said companies gaining over 4 per cent.

ITC, L&T, Infosys and Reliance also made major gains in excess of 3 per cent by the end of day.

This comes after days, nearly a two-week long period of decline, that marred the market, pushing Sensex below its 80K mark, and Nifty, much below its 25K mark.

It remains to be seen, whether the much discussed market correction that brought about bringing the indices to their actual value, has come to an end or whether sea of red will continue in the time to come.

In addition, it also remains to be seen, whether, the election results for teh critical state of Maharahstra would have an effect on the market, in the next trading week.

Asian Markets

The Asian markets also flourished green with great momentum, as these indices closed on a positive note as well.

Japan’s Nikkei gained 0.68 per cent or 257.68 points, moving towards the 40K mark, closing at 38,283.85.

Another Tokyo-based index, TOPIX, closed at 2,696.53, gaining by 0.51 per cent or 13.72 points.

As we move to China, the story was a lot different, as, contrary to the Indian and Japanese markets, the Chinese markets closed in red.

Hang Seng closed with significant losses in its numbers, closing with a massive fall of 1.89 per cent or 371.14 points, at 19,229.97.

The loss was even greater in mainland China, as the Shanghai-based SSE Composite also ended the day’s trade with deep cuts. The index crumbled by 3.06 per cent or 103.21 points of its value and closed at 3,267.19.

South Korea’s KOSPI was in tandem with other market as closed with some good news. KOSPI closed with an increase of 0.83 per cent or 20.61 points, closing for the day at 2,501.24.

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Business

‘Innocent Unless And Until Proven Guilty’: Adani Group Issues Statement In The US Bribery Indictment; Denies Charges, Calls Them Baseless

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The Adani Group, which has been at the eye of the storm since the beginning of the new day, has issued a statement in the US Indictment matter.

Adani Denies Charges

The company, in a statement procured by the conglomerate-owned IANS, said, “The allegations made by the US Department of Justice and the US Securities and Exchange Commission against directors of Adani Green are baseless and denied.”

Furthermore, the statement asserted its stance and added, “As stated by the US Department of Justice itself, “the charges in the indictment are allegations and the defendants are presumed innocent unless and until proven guilty.” All possible legal recourse will be sought.”

Committed to Highest Standards

The Adani Group further added that it has always upheld and is steadfastly committed to maintaining the highest standards of governance, transparency and regulatory compliance across all jurisdictions of its operations.

US Court Indicts Adani and Co.

The company, in an attempt to assuage stakeholders, partners and employees, said that the company is a law-abiding organisation, fully compliant with all laws.

The storm was kicked off by a post from short-seller group Hindenburg, which shared the news of the US Federal Court’s indictment of Gautam Adani and seven others associated with the company.

Billionaire Gautam Adani has been charged by US prosecutors for allegedly being part of a scheme to pay over USD 250 million (about Rs 2,100 crore) bribe to Indian officials in exchange of favourable terms for solar power contracts.

The press release from the US court elaborated on the allegations and claimed that the company and its leadership had indulged in mass bribery activity, in which the company bribed Indian officials to bag a contract for its Adani Green Energy company.

This in turn led to misleading American investors and global financial investors.

The court reportedly also issued an arrest warrant against Gautam Adani and seven others.

Adani Shares Tank

In the aftermath of the report, Adani Group company shares tanked at Dalal Street. With Adani Enterprises shares hitting the lower circuit, losing 20 per cent of their value. The situation was the same with the other Adani stocks, including Adani Green Energy, which is in the middle of the new storm.

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Business

Bharat NCAP Awards 5-Star Crash Test Rating to Mahindra Thar Roxx

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The Mahindra Thar Roxx has earned a prestigious 5-star rating in Bharat NCAP’s latest crash tests, reflecting its commitment to safety. Recently evaluated under stringent testing, the SUV excelled with a 31.09 out of 32 score for adult occupant protection and 45 out of 49 for child safety.

Tested in its AX5L and MX3 variants, the Mahindra Thar Roxx delivered notable results, scoring 15.09 out of 16 in the Frontal Offset test and a perfect 16 out of 16 in the Side Impact test. The assessment revealed strong protection for most areas, with adequate ratings for the driver’s chest and lower legs.

The Mahindra Thar Roxx has received high marks for child occupant safety, scoring 24 points in Bharat NCAP tests, along with 12 points for CRS (Child Restraint System) installation and a Vehicle Assessment Score of 9. This top-tier safety rating applies to all Thar Roxx units produced from November 2024 onward, underscoring Mahindra’s dedication to enhancing safety features across its SUV range. Additionally, Mahindra’s XUV400 and 3XO models have also achieved 5-star safety ratings, further emphasizing the automaker’s commitment to robust safety standards.

The Mahindra Thar Roxx offers two interior themes – Classic Ivory and a new Dark Mocha Brown. Comfort and convenience are prioritizing with ventilated seats, leatherette upholstery, a digital driver display, a larger 10.25-inch touchscreen, a high-quality Harmon Kardon sound system, a panoramic sunroof, rear AC vents, wireless connectivity for Apple CarPlay and Android Auto, and a six-way adjustable driver’s seat, combining practicality with luxury.

Mahindra Thar 5-door comes packed with safety and interior upgrades to enhance its appeal. On the safety side, it includes essentials like six airbags, three-point seatbelts for all occupants, hill control features, electronic stability control, and a seatbelt reminder. Advanced driver-assist features, such as autonomous emergency braking, adaptive cruise control, lane-keeping support, lane departure alerts, and a 360-degree camera system with blind spot monitoring, add an extra layer of protection.

Mahindra Thar Roxx offers two engine choices: a 2.0-litre turbo-petrol and a 2.2-litre diesel. The petrol engine comes in two setups—150 bhp and 330 Nm of torque for the manual, and 174 bhp with 380 Nm for the automatic. The diesel option is available only with four-wheel drive.

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