Amid market volatility and cautious investor sentiments, Indian broking industry is estimated to post a moderate growth of 5-10 per cent in the current fiscal (2018-19) with estimated revenue projected at Rs 195 billion-200 billion, said a report released on Thursday.
The study, released by rating agency ICRA, also said that domestic capital markets would remain range-bound with a prolonged period of volatility given the weakening of investor sentiment and challenging domestic and global cues.
"The Indian broking industry is estimated to post a moderate growth of 5-10 per cent in FY2019 with estimated revenue projected at Rs 19,500-20,000 crore. This is on the back of a strong FY2018 (2017-18) with industry turnover of Rs 18,000-19,000 crore and year-on-year growth of over 30 per cent," it said.
While on one hand, the volatility in the markets is expected to encourage trading turnover, on the other hand, the recent corrections in valuations, coupled with the cautious investor stance, would have a bearing on industry revenues, the rating agency said in the report.
Commenting on the industry trend, the rating agency's Vice President and Co-Head (Financial Sector Ratings) Samriddhi Chowdhary, said: "The recovery in the first half of this fiscal was not broad-based and remained largely limited to the large-cap segment. While the flagship indices of the two exchanges touched an all-time high in August, rising to about five per cent over the earlier high achieved in January, the mid- and small-cap indices on the two exchanges trailed 5-20 per cent behind the peak level seen in January."
"The underperformance of mid- and small-cap securities had a bearing on retail investor participation, particularly in the cash segment, with the investors yet to recoup their losses. The decline in delivery volumes in the cash segment also points towards the growing shift towards trading as opposed to investment-oriented transactions," she added.
The markets reported resurgence in the current fiscal after a slide in February and March, before witnessing a correction from September.
Concerns like rising interest rates, systemic liquidity tightening, heightened concerns on the credit quality of non-banking financial companies (NBFCs) and weak investor sentiment further impacted the markets, the report said.
On an aggregate basis, the equity markets reported a turnover of Rs 1,191 trillion in the first half of FY2019 (2018-19), registering a growth of 55 per cent over Rs 770 trillion in the corresponding period in the previous fiscal.
"Going forward, a meaningful revival in corporate earnings and abatement of liquidity and capital availability issues would be a key for further fillip to the capital markets and for boosting FPI (foreign portfolio investor) equity inflows. Notwithstanding these, the near term outlook for the domestic broking industry is stable," Chowdhary added.