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Domestic brokerages are estimated to post moderate growth of 5-10 per cent in FY19 with estimated revenue at ₹19,500-20,000 crore, says a report from ICRA.
The average daily turnover increased to ₹9.53 lakh crore from ₹6.21 lakh crore during the same period; it stood at ₹7.04 lakh crore in FY18, the study found.
The broking yields are expected to contract further, given the competitive pressures and the increase in low-yielding derivatives and the non-delivery segment. This, in turn, is expected to result in moderation of profitability from core broking operations in the current fiscal after a year of supernormal profits, said the ICRA report. The rating agency further said: “Services such as margin funding and distribution of financial services could help support the income profile of full-service brokerage houses given the price-based competition from discount brokerage houses.”
The domestic capital markets are expected to remain range-bound over the near-term with a prolonged period of volatility given the weakening of investor sentiment and challenging domestic and global cues, the report added.
Going forward, FPI flows are expected to remain muted, with net outflow of $8-10 billion in FY19, compared to inflows of $4 billion in FY18, considering the weak macro-economic outlook, the ICRA report said. However, domestic institutional investors are expected to remain steady over the near term and would support the domestic capital markets, according to the report.
Other factors that could influence FPIs inflow include corporate earnings, State election outcome, result of the resolution of NPAs and its impact on the health of the banking sector.
While the FPI segment will remain a key market participant, a growing DII segment is a positive development for the domestic capital markets, providing them with much-needed resilience, ICRA added. The retail participation, which had emerged as a key theme in the context of Indian capital markets over the past few years, is expected to moderate to an extent with investors recouping the losses arising from the market corrections. “However, the large untapped market in this segment, which is a growth driver for the long term, would help cushion the impact to some extent,” ICRA said.
"A meaningful revival in corporate earnings and abatement of liquidity and capital availability issues would be key for further fillip to the capital markets and for boosting FPI equity inflows,” ICRA’s Vice-President and Co-Head (Financial Sector Ratings), Samriddhi Chowdhary, said in the release.
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