Country's equity markets remained fragile during 2015-16 with trading volumes falling 9 per cent over the previous fiscal, largely owing to slow recovery of the economy, continued weak corporate earnings and volatility in the global markets, says a report.
The market volumes declined by 9 per cent, while the equity average daily volumes dropped by 10 per cent during 2015-16 to nearly Rs 3 trillion, domestic rating agency ICRA said in a report.
"The softening of the market can be largely attributed to slower than anticipated recovery in the domestic economy, continued weak earnings profile of India Inc and volatility in the global markets," ICRA said.
Besides, the report has found that while trading volumes on commodity exchanges rose 8 per cent during financial year 2015-16, they remain significantly lower than the volumes reported prior to the implementation of the Commodity Transaction Tax (CTT).
Similarly, on the currency exchange even though the volumes rose by 4 per cent in the last fiscal, it was lower than historic highs.
"The uptick in the currency segment volumes may be partly attributed to raising of stipulated limits for bank stock brokers by Sebi within the currency derivative segment to USD 1 billion from USD 100 million earlier," ICRA noted.
Further, the report estimates that the broking revenues for the industry has declined by about 7-8 per cent in 2015-16 compared to previous fiscal on the back of lower volumes and also pricing pressures across the segments.
A rise in cost structures - in the backdrop of players resuming hiring and executing expansion plans following a benign FY15 - kept the overall profitability matrices of brokerage houses under pressure.
"Standalone brokerage revenues and profitability will continue to witness some pressure in FY17 unless corporate earnings show signs of revival," ICRA Senior Vice-President and Co-Head (financial sector ratings) Karthik Srinivasan said.
