A story I wrote last week on brokerage firms' Jan-Mar 2017 financials -- http://www.cogencis.com/differentiators/ShareNews.aspx?newsId=937744
Institutional brokerages Jan-Mar PAT growth better than retail firms
Profits of large domestic brokerage firms with a heavy dependence on retail clients fell in Jan-Mar even as those with a decent institutional clientele saw profits rise.
During the quarter, trading turnover rose across the board on stock exchanges.
The mixed performance of large brokerage firms followed a slide in the profits across the board in the December quarter.
Cash market turnover on the National Stock Exchange of India rose 20% on quarter to 14.38 trln rupees in Jan-Mar, which was much better compared to the 10% on-quarter decline seen in Oct-Dec.
Key factors driving up stock market trading volumes were a sharp rise in benchmark equity indices and increase in trading activity by institutional investors.
Investor sentiments picked up in Jan-Mar after the previous quarter had seen it taking a big hit. The December quarter had seen subdued stock market activity due to the demonetisation-induced fall in corporate earnings in many sectors. Also, foreign funds outflow in Oct-Dec, on the back of uncertainties around Donald Trump's win in the US presidential elections.
Net inflow by foreign portfolio investors in the equity cash market was 365 bln rupees in Jan-Mar, compared with a net outflow of 343 bln rupees in Oct-Dec.
On gross turnover basis, an indicator of overall trading activity, FPIs traded more in Jan-Mar.
The sum of FPIs' purchases and sales rose 16% on quarter to 6.44 trln rupees in Jan-Mar. This was an improvement over the 5% on-quarter fall in the previous quarter.
Net inflow of mutual funds into the cash market fell 64% on quarter to 115 bln rupees in Jan-Mar. But they still fueled the trading momentum in the stock market as their gross cash market turnover--sum of purchases and sales--shot up by 31% on quarter to 2.34 trln rupees during the March quarter.
The equity derivatives market of the NSE too, saw total turnover rise by 11% on quarter to 276.24 trln rupees in Jan-Mar. NSE makes up for over 99% of all equity derivatives trading in the country,
BSE's cash market turnover jumped up 132% on quarter to 4.23 bln rupees in Jan-Mar, which stock market analysts was aided in a big part by bulk trades involving transfer of shares by promoters.
In the previous quarter, BSE had seen it cash market turnover fall 12% on quarter to 1.82 trln rupees.
BROKERAGES' PROFITS
Out of four large brokerage firms, for which Jan-Mar earnings data was available from their listed parent companies, two firms recorded on-quarter rise in profit from broking activities while two firms saw it fall on quarter.
All these four brokerage firms saw a 9-14% on-quarter fall in profit in the December quarter.
ICICI Securities, which operates ICICIdirect, the largest online retail broking platform in the country, is pre-dominantly dependant on revenues from its retail clients.
The firm saw its net profit decline 6% to 830 mln rupees in Jan-Mar. It was, however, less severe than the 11% on-quarter fall in net profit recorded by the brokerage firm in the previous quarter.
Faring better was Kotak Securities, having a decent institutional business along with national retail operations. The firm's net profit in Jan-Mar stood at 1.21 bln rupees, up sharply from 850 mln rupees in Oct-Dec.
Kotak Securities' net profit had fallen 11% on quarter in Oct-Dec. Revenues rose 28% on quarter to 3.67 bln rupees in Jan-Mar.
According to the firm, the firm had 1.4 mln secondary market customers at the end of March, up from 1.3 mln rupees a quarter ago. The number of its branchises and franchises, however, declined to 1,281 from 1,300.
Edelweiss Financial Services Ltd carries out equity broking operations through its subsidiary, Edelweiss Broking, and also has a significant institutional business. The firm also other subsidiaries, including one into commodity broking business.
In Jan-Mar, the subsidiaries of Edelweiss Financial, collectively clocked a net profit of 400 mln rupees, up 29% from the previous quarter. Their collective revenues rose 12% to 2.49 bln rupees during the March quarter.
Retail-oriented brokerage firm, Motilal Oswal Securities, earned 1.98 bln rupees as revenue from broking activities in Jan-Mar, up 8% from the December quarter, according to an earnings presentation of the parent company, Motilal Oswal Financial Services Ltd, which is listed on the stock exchanges.
The broking firm said the March quarter saw disproportionate high cash volumes in the market due to large-scale inter-promoter transfers.
This led to a muted revenue growth during the quarter and the broking firm's net profit fell to 180 mln rupees in Jan-Mar from 214 mln rupees in Oct-Dec recording a 16% decline.
In the December quarter, Motilal Oswal Securities had seen its net profit fall by a lower degree of 9% on quarter.
These four broking firms are among the top 20 broking firms in terms of numbers of unique client codes held with the NSE. Every investor account of a brokerage firm carries a unique client code at the time of transacting on the stock exchanges.
Data from NSE showed that as on Apr 30, these four brokerage firms had 1.20 mln unique client codes, accounting for around 26% of aggregate across all NSE brokerage firms.
All in all, the March quarter saw an across-the-board rise in turnover on the stock exchanges and institutional investors traded more than they did in the previous quarter.
But since retail investors were not as active as the institutional investors during the quarter, the brokerage firms with heavy reliance on retail clients did not do as well as those with a better retail-institutional mix of business.
Institutional brokerages Jan-Mar PAT growth better than retail firms
Profits of large domestic brokerage firms with a heavy dependence on retail clients fell in Jan-Mar even as those with a decent institutional clientele saw profits rise.
During the quarter, trading turnover rose across the board on stock exchanges.
The mixed performance of large brokerage firms followed a slide in the profits across the board in the December quarter.
Cash market turnover on the National Stock Exchange of India rose 20% on quarter to 14.38 trln rupees in Jan-Mar, which was much better compared to the 10% on-quarter decline seen in Oct-Dec.
Key factors driving up stock market trading volumes were a sharp rise in benchmark equity indices and increase in trading activity by institutional investors.
Investor sentiments picked up in Jan-Mar after the previous quarter had seen it taking a big hit. The December quarter had seen subdued stock market activity due to the demonetisation-induced fall in corporate earnings in many sectors. Also, foreign funds outflow in Oct-Dec, on the back of uncertainties around Donald Trump's win in the US presidential elections.
Net inflow by foreign portfolio investors in the equity cash market was 365 bln rupees in Jan-Mar, compared with a net outflow of 343 bln rupees in Oct-Dec.
On gross turnover basis, an indicator of overall trading activity, FPIs traded more in Jan-Mar.
The sum of FPIs' purchases and sales rose 16% on quarter to 6.44 trln rupees in Jan-Mar. This was an improvement over the 5% on-quarter fall in the previous quarter.
Net inflow of mutual funds into the cash market fell 64% on quarter to 115 bln rupees in Jan-Mar. But they still fueled the trading momentum in the stock market as their gross cash market turnover--sum of purchases and sales--shot up by 31% on quarter to 2.34 trln rupees during the March quarter.
The equity derivatives market of the NSE too, saw total turnover rise by 11% on quarter to 276.24 trln rupees in Jan-Mar. NSE makes up for over 99% of all equity derivatives trading in the country,
BSE's cash market turnover jumped up 132% on quarter to 4.23 bln rupees in Jan-Mar, which stock market analysts was aided in a big part by bulk trades involving transfer of shares by promoters.
In the previous quarter, BSE had seen it cash market turnover fall 12% on quarter to 1.82 trln rupees.
BROKERAGES' PROFITS
Out of four large brokerage firms, for which Jan-Mar earnings data was available from their listed parent companies, two firms recorded on-quarter rise in profit from broking activities while two firms saw it fall on quarter.
All these four brokerage firms saw a 9-14% on-quarter fall in profit in the December quarter.
ICICI Securities, which operates ICICIdirect, the largest online retail broking platform in the country, is pre-dominantly dependant on revenues from its retail clients.
The firm saw its net profit decline 6% to 830 mln rupees in Jan-Mar. It was, however, less severe than the 11% on-quarter fall in net profit recorded by the brokerage firm in the previous quarter.
Faring better was Kotak Securities, having a decent institutional business along with national retail operations. The firm's net profit in Jan-Mar stood at 1.21 bln rupees, up sharply from 850 mln rupees in Oct-Dec.
Kotak Securities' net profit had fallen 11% on quarter in Oct-Dec. Revenues rose 28% on quarter to 3.67 bln rupees in Jan-Mar.
According to the firm, the firm had 1.4 mln secondary market customers at the end of March, up from 1.3 mln rupees a quarter ago. The number of its branchises and franchises, however, declined to 1,281 from 1,300.
Edelweiss Financial Services Ltd carries out equity broking operations through its subsidiary, Edelweiss Broking, and also has a significant institutional business. The firm also other subsidiaries, including one into commodity broking business.
In Jan-Mar, the subsidiaries of Edelweiss Financial, collectively clocked a net profit of 400 mln rupees, up 29% from the previous quarter. Their collective revenues rose 12% to 2.49 bln rupees during the March quarter.
Retail-oriented brokerage firm, Motilal Oswal Securities, earned 1.98 bln rupees as revenue from broking activities in Jan-Mar, up 8% from the December quarter, according to an earnings presentation of the parent company, Motilal Oswal Financial Services Ltd, which is listed on the stock exchanges.
The broking firm said the March quarter saw disproportionate high cash volumes in the market due to large-scale inter-promoter transfers.
This led to a muted revenue growth during the quarter and the broking firm's net profit fell to 180 mln rupees in Jan-Mar from 214 mln rupees in Oct-Dec recording a 16% decline.
In the December quarter, Motilal Oswal Securities had seen its net profit fall by a lower degree of 9% on quarter.
These four broking firms are among the top 20 broking firms in terms of numbers of unique client codes held with the NSE. Every investor account of a brokerage firm carries a unique client code at the time of transacting on the stock exchanges.
Data from NSE showed that as on Apr 30, these four brokerage firms had 1.20 mln unique client codes, accounting for around 26% of aggregate across all NSE brokerage firms.
All in all, the March quarter saw an across-the-board rise in turnover on the stock exchanges and institutional investors traded more than they did in the previous quarter.
But since retail investors were not as active as the institutional investors during the quarter, the brokerage firms with heavy reliance on retail clients did not do as well as those with a better retail-institutional mix of business.
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