Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

Investor exuberance propelling broking industry performance, MTF achieves a new high: ICRA

Posted On: 2024-01-11 18:56:44 (Time Zone: IST)

ICRA has analysed the performance of 29 prominent brokerage companies in H1 FY2024. Supported by improved market activity, ICRA's sample set of companies reported a sharp 20% annualised growth in the net operating income. Given the benefits of economies of scale, the aggregate profitability of this sample set also improved, with a 24% annualised increase in the net profit and a return on equity of 27% in H1 FY2024 compared to 25% in FY2023. ICRA expects the industry to report all-time high revenues and net profits with a year-on-year (YoY) expansion of 18-22% and 22-25%, respectively, in FY2024.

Secondary market returns have recovered in the current fiscal with major benchmark indices registering new highs after the tepid performance in FY2023. While this was supported by the sustained participation of domestic investors, foreign institutional investors too turned net buyers in 10M FY2024 after being net sellers in the last two fiscals. While Indian markets continue to trade at a premium, the possibility of foreign portfolio investor inflows further boosting secondary market returns, in light of the indications of rate cuts by major central banks in the near to medium term, cannot be ruled out.

According to Mr. Deep Inder Singh, Vice President - Financial Sector Ratings, ICRA, "The active National Stock Exchange (NSE) client base, which was moderating since March 2022, expanded in recent months amid revival in primary market activity and improving secondary market returns. Investor exuberance is also visible in the record equity assets under management and systematic investment plan counts registered by the mutual fund industry in the current fiscal. With the healthy initial public offering pipeline, the retail participation trajectory is expected to remain intact in the near term."

With the improvement in investor sentiment, the cash segment average daily turnover rebounded to Rs. 0.73 lakh crore in H1 FY2024, up 27% from the FY2023 level. The margin trade funding (MTF) segment also gained traction, registering new highs in the current fiscal. After reporting a flattish trajectory in FY2023, the aggregate industry-wide MTF exposure grew by 98% from March 2023 to ~Rs. 51,000 crore on December 28, 2023. The participation of retail investors also remained strong in the futures & options segment, driven by the launch of new index options, miniaturisation of contracts/lot sizes, and separate weekly expiries for each index option. During FY2020 to FY2023, the number of contracts traded increased by about nine times. Moreover, the number of contracts traded expanded by 2.4 times, on a YoY basis, in H1 FY2024. While the participation of retail investors can be impacted in the short term by adverse developments, the modest share of wallet of the equity segment in household savings indicates untapped potential for sustainable growth for the broking industry over the longer term.

Providing more insight, Mr. Singh said, "Supported by the buoyant market conditions in Q2 FY2024, the annualised average revenue per user of 12 of the 17 leading brokers in H1 FY2024 is estimated to have exceeded the industry's best-ever performance till date, which was in FY2022."

Given the substantial new client additions in the past few fiscals, discount brokerage houses continue to hold a leadership position, in terms of market share of active NSE clients, at 65% in November 2023 compared to 18% in March 2019. The market share of non-bank full-service brokers and bank-based brokers stood at ~21% and 14%, respectively, in November 2023.

Although the borrowings by brokerage entities were historically low, financial leverage has increased considerably in recent fiscals with the material scale-up of the MTF and increased working capital requirements due to regulatory changes for the securities broking industry. The aggregate leverage of bank brokers, which dominate the MTF segment, increased to 1.9 times as of September 30, 2023, from 0.4 times as of March 31, 2020. During this period, the aggregate gearing of non-bank full-service brokers increased to 1.1 times from 0.4 times. Discount brokers, with a limited presence in MTF, reported marginal dependence on borrowings.

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

CRISIL Ratings: Jute makers to see margins drop for the second straight fiscal

Kotak Institutional Equities: Metals & Mining: Steel prices under downward pressure

Securitisation volumes estimated at about Rs. 45,000 crore for Q1 FY2025: ICRA

CRISIL Ratings: Small and medium REITs to broaden realty investor base

Axis Securities' Monthly Auto Volume Update - July 2024

Kotak Institutional Equities: Diversified financials: AMCs & RTAs - In beta mode

Kotak Institutional Equities: Automobiles & Components: Weak retail trends across segments

More financial power to women: A study by Axis Mutual Fund reveals a remarkable increase in women investor base with ~72% taking investment decisions independently

Kotak Institutional Equities: Crop & Chemical Dashboard: China output growth is a worry

Kotak Institutional Equities: Strategy: Promoters selling, retail (through MFs) buying

Kotak Institutional Equities: Strategy: Foreign fund-flow tracker, June 2024

Kotak Institutional Equities: Banks: Hanging on to the good numbers, for now | RBI FSR report

Kotak Institutional Equities: Telecom: R-Jio takes the lead with ~20% tariff hikes

Kotak Institutional Equities: IT Services: IT preview-moderate improvements

CRISIL MI&A: Offshore wind energy reaps viability gap funding tailwind

Repco Home Finance | 'On firm footing towards growth' | Maintain BUY - Share India Securities

Cosmo First Limited | Packing a Punch: All Set To Get Its Mojo Back - Share India Securities

Kotak Institutional Equities - Strategy: Elections 2024: Any change in economic agenda?

India Strategy - Political risk perception on the rise - Report by InCred Equities

DOMS Industries Ltd - Evolving from stationery to kids-centric products - Share India Securities Ltd

Kotak Institutional Equities - Economy: Trade deficit widens to a seven-month high

Adani Ports & Special Economic Zone Ltd - Reasonable listed group leverage; steep valuation - REDUCE - Downgrade - Report by InCred Equities

Kotak Institutional Equities - Banks: Jharkhand farm loan waiver: No concerns for microfinance

Banks - Consolidation phase to continue - Report from InCred Equities

Kotak Institutional Equities - Strategy: On frogs, pigs, vultures (and apes)

India Strategy - Money, Military and Markets-III - Report from InCred Equities

CRISIL Ratings: Steady demand to power up revenue of battery makers by 10-11%

Elevated gold prices to restrain jewellery consumption growth to 6-8% in FY2025: ICRA

Elara Securities India - Diet Report - Ambuja Cements - Cash deployment starts

Kotak Institutional Equities - Consumer Staples: Month in review: May 2024

Elara Securities India - Banking & Financials - Retail loans to MFI borrower a risky affair - Sector Update

Kotak institutional Equities - Real Estate: Hitting the Billion Mark

CRISIL Ratings: Tide turns for ship recyclers, revenue seen rising ~15% this fiscal

Elara Securities India - Diet Report - Media & Entertainment - Wait turns longer for occupancy revival

Elara Securities India - Economics - India: CPI inflation continues to ease

Kotak Institutional Equities - ESG, Global carbon pricing trends 2023: Needs more ambition

Kotak Institutional Equities - Economy: Inflation remains steady in May

Kotak Institutional Equities - Strategy: NTPC and PWGR are neither growth nor value stocks

Elara Securities India: Automobiles - Tata Motors - Aggressive PV market share target - Company Update - Accumulate - TP: INR 1,100 - Upside: 11%

Finance Companies - Gold lending in the spotlight - Report by InCred Equities

CRISIL Ratings: Revenues of shrimp exporters to grow 8-10% as demand improves

Elara Securities India: Utilities & Renewables - Peak demand ascends to record highs - Monthly Update

Tata Motors - Analyst meet highlights - REDUCE - Maintained - Report by InCred Equities

Kotak Institutional Equities - Pharmaceuticals: IPM pulse - gaining momentum

Elara Securities India - Metals & Mining - Input cost inches up - Monthly Update

CRISIL Ratings: Paints sector to double production capacity by fiscal 2027

Elara Securities India-Economics - India: Smooth sailing into H2CY24

Kotak Institutional Equities - Insurance, NoP drives APE growth for private players

Financial Services - AMCs - Election month propels equity fund inflow - Report by InCred Equities

Kotak Institutional Equities - Strategy: Fight, flee or join a stampede?

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020