Angel Broking, Geojit: More upside likely for brokerage-related stocks

Increased volumes-based buying shows market participants' keen interest in brokerage firms

The stock broking and asset management industry has been one of the most rewarded industries amid the Covid-19 pandemic. As financial institutions lowered interest rates to spur economic growth, investors turned to stock markets to secure their financial position. In FY21, the industry revenues are pegged to have grown between 65-70 per cent over FY20. The strong growth was underpinned by robust addition in new customers, according to rating agency Crisil.

In the first nine months of FY21, the broking industry added 5.2 million new clients – more than what they added during the preceding four years, cumulatively. As on December 2020, the total active client base to stood at 160 million

At the bourses, stocks of various brokerage houses and AMCs have zoomed nearly 300 per cent since March 2020. Shares of Geojit Financial Serivces, for instance, jumped 290 per cent between March 24, 2020 and May 11, 2021, while those of 5Paisa Capital, Emkay Global Financial Services and Aditya Birla Money zoomed up to 263 per cent. In comparison, the Nifty50 index is up 90 per cent during the period while the broader Nifty500 index has advanced 99 per cent, ACE Equity data show.

Going-forward, however, Crisil believes the industry may see moderate revenue growth as market volatility and phased implementation of new margin regulations could be a drag on incremental volume growth in the current fiscal (FY22). The new client additions, the agency says, are not translating into higher revenues for the industry. During the December quarter, the broking revenue de-grew by 1-8 per cent on a sequential basis

"Performance in the December quarter shows signs of fatigue creeping in, with most broking entities registering on-quarter de-growth in revenue , despite continued record client additions," said Krishnan Sitaraman, Senior Director, CRISIL Ratings. The regulatory changes could be weighing on trading volumes.  

Against this backdrop, here is how shares of industry leaders are looking from technical viewpoint:

Angel Broking Ltd (ANGELBRKG)

Likely target: Rs 700 -  Rs 730

Upside potential: 5.11% - 9.61%

In the last seven sessions, the stock has risen over 70 per cent with the Relative Strength Index (RSI) witnessing buying momentum even in the overbought category. The volumes have seen phenomenal increase during the same period indicating keen interest of market participants. Going forward, the support of Rs 600 seems to hold the key for further upside bias. If that prevails, the stock may rally towards Rs 700 and Rs 730-mark, as per the daily chart. CLICK HERE FOR THE CHART

Motilal Oswal Financial Services Limited (MOTILALOFS)

Likely target: Rs 800 and Rs 830 (after crossing Rs 750)

Upside potential: 6.67% - 10.67%

This stock had successfully conquered the immediate resistance of Rs 700 and extended its rally towards higher levels. Now, the current momentum has a resistance at Rs 750, as per the weekly chart. Until this resistance is not conquered aggressively, the upside bias may not receive expected positivity. Upon crossing this mark, the breakout may see a rally towards Rs 800 and Rs 830 levels. The Moving Average Convergence Divergence (MACD) is sustaining above the zero line successfully indicating a positive direction. CLICK HERE FOR THE CHART
 
Geojit Financial Services Ltd (GEOJITFSL)

Likely target: Rs 70

Upside potential: 9%

The stock of this brokerage house is attempting to close above the significant resistance of Rs 64 levels. Once that happens, the upside breakout may see a rally towards Rs 70 levels. The MACD has crossed the zero line upward reflecting a positive bias in the upcoming sessions, as per the daily chart. Moreover, the volumes have been supportive of the upward bias. The immediate support comes at Rs 60 mark. CLICK HERE FOR THE CHART
 
Emkay Global Financial Services Ltd (EMKAY)

Likely target: Rs 80 and Rs 85(after crossing Rs 75)

Upside potential: 6.67% - 13.33%

The "Inverse Head and Shoulder" indicates a breakout on the daily chart. The stock needs to cross the hurdle of Rs 75 mark to breakout towards Rs 80 and Rs 85-mark. The immediate support comes at Rs 65 levels. The MACD is attempting to cross the zero line upward, indicative of the positive bias. CLICK HERE FOR THE CHART
 
HDFC Asset Management Company Ltd (HDFCAMC)

Likely target: Rs 2922 – Rs 2,871

Upside potential: 4.58% - 2.76%

As long as the stock defends the support of 200-days moving average (DMA), the upside bias may see a rally towards the range of Rs 2,922 – Rs 2,871 levels. The current momentum indicates an upward bias as RSI and MACD have made positive crossovers, as per the daily chart.. CLICK HERE FOR THE CHART