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Tania Kishore Jaleel

Mumbai, Nov. 10 Broking firms saw their net profits soar for the second consecutive quarter after a year of falling profits.

Many have gone back to their “old” salary structures, have started opening new branches. May employees of these firms say that for the time being at least, they feel “things are good”.

Mr C.J. George, Managing Director at Geojit BNP Financial Services, said the main revenue stream that contributed to the profits is income from broking-related activities.

Motilal Oswal’s income from broking has increased 31 per cent; India Infoline’s income from broking activities increased 36 per cent. JM Financial saw a 57 per cent increase in its investment banking and securities income.

In the second quarter, volumes traded on BSE rose 73 per cent. The number of shares traded on the exchange were 3,306 crore shares, up from 1,903 crore shares in the same year-ago quarter.

Retail participation has been good, but not as good as during the levels seen in 2007, said Mr George. “Retail investors did book a good amount of profit during this quarter. The NRIs, especially, bought heavily when the markets were at lower levels in the first quarter of the current fiscal and booked hefty profits in the second.”

Mr Deven Choksey, Managing Director at KR Choksey, said retail investors are now entering the markets for the long haul. He also said that though broking profits have increased, it was mainly because of the cost-cutting measures the firms took during the downturn. “The total income has not increased much but the costs incurred have fallen significantly, which has led to an increase in profits.”

With investors slowly gaining confidence in the markets, brokers are optimistic about the next few quarters.

Mr Rakesh Goyal, Senior Vice-President of Bonanza Portfolio, said, “I feel more optimistic now than during the boom time of 2007. There is enough sanity among investors, people are cautious, markets are not zooming to very high levels, there is not much frenzy and costs are very much under control. All this has led to the top line of companies growing.”

The managing director at a brokerage said the volatility in the markets will work in favour of broking firms. “Our broking income will increase further due to the volatility in the markets. Volatility in the markets means increase in volumes.”

Profits are rising and broking firms are steadily going ahead with their growth and diversification plans that they had to put on hold due to the market crash last year.

The CEO at a brokerage in Mumbai said they have started insurance distribution to make up for the low returns from the mutual fund distribution business. “This diversification has helped us a lot. We had cut salaries last year this quarter, but we have gone back to the pay packages of 2007. We have been getting good number of enquiries for franchisees too.”

Geojit will open up to 18 branches by the end of the calendar year said Mr George.

Starting the commodities business was a good move, said Mr Goyal, adding that he is waiting for the NSE to start its mutual funds trading platform, which could add to the company’s revenues in a big way.

More Stories on : Financial Performance | Financial Services

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