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| More foreign brokerages may wind up | | | / Business Standard November 23,2001 | | | |
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| More Foreign Brokerages May Wind Up |
| / BUSINESS STANDARD Nov 23, 2001, 00:00 IST |
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After domestic brokers, it’s now the turn of foreign brokerage houses to close shop in India. The exit of WI Carr and BNP Paribas from the Indian market is just the beginning of what might turn out to be a flood of overseas brokerage houses bidding farewell to India. At least three others in India are said to be in exit mode.
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| The global slowdown coupled with the depressed state of the equities market is taking their toll on the brokerage business in India. Indeed, domestic brokerage houses have been on a downsizing spree. They have cut jobs as well as salaries as the volume of business is on the wane. Many domestic brokerage houses and sub-brokers have already closed down. Many online trading brokerage affiliates too have closed down in the past six months.
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According to market sources, a Singapore-based broking house, an Indian institutional broking joint venture with a foreign brokerage house and a US-based firm which bought out a Hong Kong-based firm are planning to move out of India.
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Credit Suisse First Boston is already out of business because of the Sebi investigations.
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The reasons for the decline of foreign brokerage houses are obvious. They find that their research reports are no longer in demand and investors are not taking any decisions based on their research work.
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Says Arun Kejriwal, director, KRIS: “Business in India is no longer viable for some of the foreign brokerage houses. Some of them can’t even cover their overhead costs and research-activity-based investing is not the flavour any more.”
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He cites low volumes and the absence of a retail base as the reasons for research-based brokerages, which mainly serve institutional investors, closing.
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“India offers a small market in Asia and if the foreign brokerages do not get value for their investments, it makes less sense to continue with research-based brokerage operations,” a leading broker who deals with such foreign joint ventures said.
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“If you look at the weight in the world market capitalisations, Japan is close to 10 per cent and the entire Asia, excluding Japan, is just 2.5 per cent. India’s share in the pie is in decimals,” he added.
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The nature of the industry and depressed state of the market have unfortunately reduced the appetite of investors for traditional research, an analyst said.
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BNP Paribas and Credit Agricole Indosuez (CAI) announced on Wednesday that they would exit their research brokerage activities in India. CAI operates in India through Indosuez WI Carr Securities, and in 10 other Asian countries, excluding Japan.
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Indosuez WI Carr’s sales offices in New York and London that handle the buying and selling of Asian stocks for institutional investors will be also closed.
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