The broking industry could see as much as 20 per cent growth in revenues to Rs 19,000 crore in 2017-18, says rating agency Icra. Healthy overall volume growth and increase in the share of the cash segment will contribute to the growth, it says.
"Volumes are likely to grow by about 20-25 per cent in 2017-18, supported by positive investor sentiment and a benign capital market outlook. The initial public offer (IPO) pipeline for FY2018 is likely to further support retail participation on the exchanges. The higher yielding cash volumes are expected to receive a boost with a likely increase in margin trading by brokerage houses pursuant to the recent regulation on lower margin requirements," Icra said in a note.
Equity turnover at the exchanges had registered growth of 35 per cent last fiscal, with the average daily turnover increasing to Rs 4 lakh crore from Rs 3 lakh crore in the previous fiscal. The positive market sentiment continues in the current fiscal, with the average daily turnover increasing to Rs 5.7 lakh crore in the June quarter, 40 per cent more than 2016-17 average.
The increase in domestic inflows provides greater resilience to the domestic capital markets. While the current capital market outlook is benign and the IPO pipeline for 2017-18 is likely to encourage retail participation, a meaningful revival in corporate earnings would provide further fillip to the capital markets and boost FII equity inflows," said Karthik Srinivasan, senior vice president and group head - financial sector ratings, Icra.
"Going forward, we expect a further improvement in the profitability of brokers in FY2018 driven by higher revenues following the uptick in the equity markets, higher interest income and control on expenses provided the brokers are able to maintain their credit costs in the margin lending business," Srinivasan added.