The Hindu Business Line : Stocks of brokerages catch investors’ fancy

Kolkata, Aug 30 In what is clearly a case of ‘mainstreaming’, stock broking companies that have listed their stocks are progressively winning a larger share of investors’ wallets.

That brokerages are becoming a sector to reckon with is evident from a clutch of tell-tale signals – a marked increase in volumes recorded by their stocks, more research going into their performance and a firmer position in institutional investors’ portfolios.

With more broking firms entering the public domain by way of capital floats – Motilal Oswal was the last player to do so – the sector is expected to emerge stronger in the days ahead, feel market circles aware of the trend.

Already, a number of players are said to be in various stages of negotiations with institutional investors for wrapping up their fund-raising exercises, a move that will rank them with the entities that have already done so in recent times.

Quite a few drivers have lately gained ground insofar as the securities broking business is concerned, sources said while referring to some of the major aspects of their operations. These will come together to further improve earnings, a larger part of which will be on account of such non-traditional segments such as distribution, research and consultancy.

The drivers include an increase in product offerings, spread of online broking, access to newer markets through branch/franchisee expansion and the like. Such factors, seen in the backdrop of the country’s new-found enthusiasm for investing in the capital market in an era of decent corporate earnings, will influence investors even more in future, it is felt.

Perception change

Funds houses that have been tracking entities such as India Infoline and Indiabulls, two of the larger players in the sector, are of the view that the business stands to gain from a “perception change”. In other words, investors will identify more reasons for stepping up allocations to broking companies’ stocks.

A range of relatively smaller players, incidentally, makes up a critical part of the space marked by listed brokerages. However, some of them have come to command reasonable levels of attention. The recently listed Emkay, for instance, currently sees passable volumes. It stood at over 11 lakh shares on the NSE on Thursday.

Constraining factors

Investment circles, it may be mentioned, have also listed a few key constraining factors.

These include an extreme fragmentation of the business, a situation that has come into being by the arrival of many small and regional players.

Capital adequacy may be a tricky issue for such small entities, it is felt.

At another level, the Indian market has started attracting global players, a trend that is giving rise to greater competition.

The comparatively smaller elements that are in favour of the business include brokers’ entry into non-traditional areas – that is, trading in equities.

There is greater emphasis on wealth management and distribution, courtesy insurance, mutual funds and personal loans.

More Stories on : Financial Services | Stocks

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page