Little chance of turnaround for brokers in FY14

No respite as revenues head south

The tough time for broking companies continued in the June quarter with major players recording a decline in revenues. The trend might see little change for the rest of the year.

For Motilal Oswal, income from broking and related activities was Rs 67.9 crore for the June quarter. It was down 11 per cent on a quarterly basis and a decline of three per cent annually. Broking yields remained under pressure for the company, which came down to 3.4 basis points in the quarter from four basis points in the previous one.

For JM Financial, broking income at Rs 20.7 crore was down 17.18 per cent from the previous quarter and 27.34 per cent from June last year. India Infoline’s results showed a 14.98 per cent decline over March to Rs 127.6 crore in June. It was marginally up over the corresponding quarter last year (2.03 per cent).

Geojit BNP Paribas saw its broking income decline to Rs 31.9 crore, down 12.92 per cent over June last year and 26.99 per cent over the previous quarter.

The brokerage said results of the June 2013 quarter were not comparable as the business of its institutional sub-broker was not accounted for, following its sale. The brokerage only has retail operations now, which recorded a fall of seven per cent over the previous quarter and a rise by the same amount over last year.

Vinay Agrawal, executive director-equity broking at Angel Broking, said the numbers were not available because it was a private company. But he also noted the stress for the segment and suggested a turnaround was unlikely in the current financial year.

“Retail participation is at an all-time low and yields may have been affected by the fact that derivatives pay less than the cash market…The time frame for a revival could be another three quarters,” he said.

Motilal Oswal, chairman and managing director of Motilal Oswal Financial Services, noted sentiment had remained weak on account of the macroeconomic environment.

“After seeing positive returns in April, the markets saw significant stress in the last two months of the quarter on the back of currency and current account deficit worries, which impacted investor interest in equities. Volumes in the high-yield cash delivery segment remained depressed, while the low-yield options segment continued to push up equity market volumes this quarter,” Oswal said in a statement after the announcement of results.

Satish Menon, executive director, Geojit BNP Paribas Financial Services, said close to 93 per cent of the total volumes came from the derivatives segment, which had a lower yield compared to the cash market. “Brokerage contributed 59 per cent of the operational revenue for the June quarter, compared to 69 per cent last year. If the market conditions remain the same, the brokerage mix might still go down,” he said, adding he expected further pressure on yield from derivatives.