Brokerage firms in focus; IIFL Holdings,Edelweiss Financial hit record high

Emkay Global, Motilal Oswal, JM Financial and Geojit Financial were up in the range of 3% to 7%

Shares of brokerage firms  rallied  up to 14% on the BSE in intra-day trade after Credit Suisse analysts have initiated coverage on IIFL Holdings and Edelweiss Financial Services with a recommendation of outperform. Both the stocks hit their respective record highs on the bourses.

IIFL Holdings surged 14% to Rs 629 in intra-day trade on the back of heavy volumes. A combined 1.04 million shares already exchanged hands on the BSE and NSE in first 35 minutes of trade, against an average sub-one million shares being traded daily in the past two weeks.

Edelweiss Financial Services too soared 9% to Rs 201 with around a combined 3.9 million shares exchanging hands on the counter on both the exchanges.

Both the companies - IIFL Holdings and Edelweiss Financial Services - come from a capital market background, but have built new businesses of scale already.

“We see a path to improving profitability/ROE (return on equity) for both. IIFL is among the few younger lenders who has already built a retail book and is market leader in the wealth management business (30% of profit before tax or PBT). We see continued growth leading to a 36% EPS CAGR. We initiate with an Rs 650 target price,” analysts said in a report.

Edelweiss's efforts on building a retail platform in the past few years should start delivering good growth. The company is the dominant leader in distressed asset finance and is investing in an insurance venture with Tokio. We expect a 34% EPS CAGR. We initiate with an Rs 220 target price key risks include interest rates (housing finance being an area of focus) and pricing in wealth management and broking, added report.

Emkay Global Financial Services, Motilal Oswal Financial Services, JM Financial and Geojit Financial Services, which engaged in broking and non-banking financial business, were up in the range of 3% to 7% on BSE, as compared to 0.32% rise in the S&P BSE Sensex.

Meanwhile, thus far in the calendar year, the stock of brokerage firms outperformed the market by gaining up to 157% against 18% rise in the benchmark index.

Motilal Oswal Financial Services, IIFL Holdings, Geojit Financial Services and Edelweiss Financial Services have seen their market value appreciated more than 100%.

COMPANY	31/12/2016	PREV CLOSE	LATEST	GAIN(%)*	GAIN(%)#
IIFL HOLDINGS	262.39	550.60	596.00	8.25	127.1
GEOJIT FIN. SER.	34.50	82.80	88.65	7.07	157.0
EMK.GLOBAL FIN.	56.95	91.35	97.55	6.79	71.3
EDELWEISS.FIN.	97.60	185.30	196.30	5.94	101.1
MOTIL.OSWAL.FIN.	522.20	1102.00	1135.35	3.03	117.4
CENTRUM CAPITAL	27.95	47.55	48.80	2.63	74.6
JM FINANCIAL	66.90	125.10	128.30	2.56	91.8
S&P BSE Sensex	26626.46	31190.56	31321.00	0.42	17.6
*Gain over previous close; # gain over 31/12/2016