Market slump forces small brokers to shut shop

Stock brokers including Geld Stock Broking, Cyrus R Vazifdar and Gayatri Capital, have given up their National Stock Exchange (NSE) membership, while at least six sub-brokers of Sykes and Ray Equities (SRE) have surrendered their registration with immediate effect.

The sub-brokers include the Mumbai-based Rachit Financial Services, Vijay Sawant, Sarabjeet Singh Jahagiadar of Pune, P S Investments from Karad, the Surat-based Jinesh Kumar Patel and Sea More Consultancy.

SRE has nearly 350 sub-brokers across the country, according to a company spokesperson. "The sub-brokers surrendered their trading licences on their own accord. Such things do happen during weak times. But these would not not affect our business interest," he said.

SRE is promoted by two partners Yogesh Gupta and Anup Gupta. It specialises in retail broking and has a turnover of over Rs 45,000 crore. The brokerage has branches in more than 100 major centers across the country.

Market watchers believe that many sub-brokers have surrendered their licenses. Sources say even some of the leading brokerage houses would find it difficult to get their franchise off the ground as the investor confidence has reached its nadir.

Small brokers mainly depend on commission-based income accruing from client trading. The commission varies from 50 paise to Rs 1 a share, out of which the sub-brokers earn 20-30 paise.

The average daily trading volumes on both BSE and NSE have declined by nearly 50 per cent in the last couple of months. The value erosion in front line stocks has not only shattered investors but rendered them cash-strapped. Both the key benchmark indices have declined by over 35 per cent each since January this year.

Meanwhile, the leading brokerages are trying to stay afloat by raising funds through debt placements and diversifying into other segments within the financial space.