After a promising start, the year 2015 ended on a sour note for most domestic brokers. The markets fell after April and overall volumes, both cash and derivatives, dipped.
With the benchmark indices continuing a surge early in the year, several brokers chose to expand. Dealers and sales staff were added, largely to cater to the inactive base of clients that had again become active. Hiring, however, was much more restrained than in the heyday of 2006-07 as brokers focused on ramping up online platforms.
The sentiment turned bearish as the year progressed. The Sensex rose 6.7 per cent between January and March and steadily fell thereafter, with a year-to-date loss of 5.6 per cent. A deficient monsoon, shaky global markets, subdued corporate earnings and a slowing Chinese economy were key reasons.
Participation from both small and wealthy individual investors dipped in the second half as the market tanked. "Retail (small) investors, in particular, are bulls by nature and their participation comes down drastically when the market tanks or is range-bound," said Prasanth Prabhakaran, head, retail broking, IIFL. “Investors that entered at high levels are stuck and are not bringing in fresh capital.”
The turnover on stock exchanges dipped after September to pre-May 2014 levels, the month the Modi government came to power, resulting in renewed interest in Indian equities from institutional and non-institutional participants. While the daily average turnover (both cash and derivatives) on the equities segment of the exchanges between June 2014 and August 2015 stood at roughly Rs 3.4 lakh crore, it slipped to below Rs 3 lakh crore between September and November, and below Rs 2 lakh crore in December.
There was a huge push from brokers towards online broking. Leading ones such as Edelweiss, IIFL and Emkay either launched or revamped their mobile apps. “The focus on developing mobile apps clearly points out that in future the investment on technology will increase and that on people will decrease,” said Rege.
The increase in the lot size in the equity derivatives segment hit brokers hard. The stipulated increase in the minimum contract size from Rs 2 lakh to Rs 5 lakh from November 1 adversely impacted derivatives volumes, leading some investors to shift to the cash segment.