The Hindu Business Line : ‘Trading, IPO & MF transactions key businesses for stockbrokers’

Stockbrokers are morphing. If you thought you knew that already, here are stats that may yet leave you zapped: A whopping 67 per cent of offer IPOs and a convincing 53 per cent offer mutual fund transactions.

Data such as these form part of a survey by Dun & Bradstreet (D&B), the organisation that has just rolled out its maiden study of India’s equity broking houses.

What, then, are brokers really up to? Well, trading, IPOs and MFs happen to be the top three products that they provide their clients. Nearly 36 per cent of the companies surveyed trade in cash and derivatives, while 27 per cent are solely in the cash market. About 20 per cent trade in cash, derivatives and commodities.

Some of the other major products that brokers are offering are Internet-based trading, depository services, corporate research and arbitrage. Portfolio management, it may be mentioned, is at the bottom of the pile – clearly, despite all the hoopla, PMS will have to go a long way.

Company research is another lucrative proposition for brokers. Over 33 per cent of the players are engaged in it. Further, value-added services, including fundamental and technical analysis as well as investment banking, are also provided by some.

New areas

In the past few years, brokers have newer opportunities in the form of commodities futures, distribution of insurance products, wealth management etc. “As the market momentum continues, broking firms will have an opportunity to introduce a wider number of products”, D&B has stated.

In the cash market, National Stock Exchange accounts for the highest share – 34 per cent of the brokers trade on it. In comparison, it is 14 per cent on BSE. More than 50 per cent are at both exchanges.

How about sub-broker networks, they surely are not a lost breed? No, 55 per cent of them are in the southern region, while 29 per cent are in the west. The north and the east account for 11 per cent and 4 per cent respectively.

The western region, however, does clearly score over the others in terms of sheer geographical spread. A high 52 per cent of the nearly 400 firms sampled are there, the maximum representation. The north, south and east account for 24 per cent, 13 per cent and 10 per cent respectively.

The survey, as D&B has put it, was done by starting with an initial base of over 1,800 broking outfits. From this lot, 464 responses were received. The roster was further whittled down – on the basis of the number of terminals – and the top 210 firms were chosen.

Special place for MFs

The country’s broking community seems to have capitalised on the growth of the asset management industry, D&B has commented while referring to the growth trends displayed by fund houses – 40 per cent in 2006.

More than 50 per cent of the brokers sampled deal in MF investment services. The average growth in assets under management in the last two years is roughly 48 per cent.

In terms of providing MF services, the western region dominates the scene with 49 per cent of the total.