SBI Caps strengthens institutional equities business

It has significant presence in investment banking but lags pvt sector peers in broking space

SBI Capital Markets, investment banking and broking arm of State Bank of India (SBI), is in the process of strengthening its institutional equities business. The brokerage plans to leverage the scale and reach of its parent, which deals with nearly a third of corporate clients in the country.

The institutional equities division of a brokerage provides services such as equity sales, trading and research to mainly big-ticket clients. These would include mutual funds, insurance companies and foreign institutional investors (FIIs). The equities business in the country is fragmented, with about 30 entities, around a dozen having a substantial position.

Although SBI Caps has significant presence in investment banking, it lags private sector peers in the broking space. Sources say Arundhati Bhattacharya, the SBI chief, is pushing for growth of the broking and institutional equities business, and has given a green signal for hiring senior talent from that segment at market salaries.

SBI Caps has hired Nirav Sheth from Edelweiss to head its institutional equities business. It has also hired about 20 analysts from rival brokerages and is in the process of hiring more, to expand research beyond the top 100 stocks.

"The ability to exploit SBI's platform will give us a lasting competitive advantage. Thanks to the parent, we will get access to the top management at almost all Indian corporates and also better access to policymakers, government bureaucrats and political machinery. This will give us an edge to grow the institutional business," said an official at SBI Caps.

Typically, institutional clients like to have views of the company management before making a big-ticket investment. Also, they prefer access to government officials, to get a macro view on the economy and policies. Often, these meetings are set up by brokerages through investor conferences.

Average daily trading volumes in the equity cash segment is around Rs 25,000 crore, while that in the futures and options segment is about Rs 4.9 lakh crore. In 2016, net investments by mutual funds and FIIs were a little more than Rs 60,000 crore.