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After being beaten down for the past seven years, stocks of brokerage firms have finally witnessed an upswing, thanks to the positive market sentiment seen in the run-up to the election results.
With a Narendra Modi-led BJP Government set to take charge at the Centre, market players are bullish on business prospects of brokerages on the back of a jump in market volumes and broking revenues. Several fund houses and foreign banks have revised their Sensex target for the year-end to 30,000 levels, which could result in a re-rating of the country’s overall financial services sector, including brokerages.
The scrips of major brokerages zoomed by 10-20 per cent on Monday after the announcement of the election results on Friday. Motilal Oswal Financial Services and Edelweiss Financial Services ended the day at ₹153 and ₹44, both up 20 per cent. IIFL Holdings rallied 10 per cent to close at ₹99 a share while Geojit BNP Paribas Financial Services rallied 11 per cent to at ₹29.
The number of trades jumped to 45.32 lakh from 22.97 lakh at the start of the month. The NSE, in fact, had witnessed a record volume of trades at 1.18 crore in the cash segment on the day Narendra Modi won the Lok Sabha elections.
Motilal Oswal, Chairman and MD of Motilal Oswal Financial Services, said: “Brokerage stocks have risen in line with the overall upswing in the market as there is excitement among people and corporates of a majority Government. This has translated into a rally across cyclical sectors such as banking, engineering and construction. But it would be too early to say if we have come to a situation far superior than before,” he added.
Expectations of the return of a strong IPO pipeline and coupled with the markets entering the first leg of the five-year bull phase that started in January have translated into a spurt in stock prices of brokerages, said the head of a broking firm who did not wish to be named.
CJ George, MD, Geojit BNP Paribas Financial Services, said: “The market-cap of stocks in this sector had come down to 20-30 per cent off their peak levels as they were completely beaten down.
“But the last few days has seen a revival in revenues and the number of clients trading per day, which is translating into a stock price spurt.”
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