Handsome earnings for brokerages as trading volumes rise

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Riding the surge in trading volumes, broking firms have raked in record earnings in the July-September quarter.

On average, revenues of top listed brokerages and market infrastructure institutions have recorded a growth of 48% in the September quarter, reported The Economic Times. Their profits jumped 55% from the year-ago period, it added.

Motilal Oswal Financial Services’ capital markets segment recorded a 44% growth at Rs 608 crore in September, the report said, adding that profit was up 52% YoY at Rs 121 crore.

Earning figures

ICICI Securities’ equities and allied business’ revenue rose 19% year-on-year to Rs 541 crore, according to the report.

IIFL Securities registered a 46% growth in revenue at Rs 318 crore while the growth in profit was 41% at Rs 72.1 crore, The Economic Times said.

The broking revenue of the IIFL Securities rose 232% year-on-year to Rs 142.7 crore for the quarter under review.

New investors

Brokerage officials attributed the jump in trading volumes to a fresh set of investors who are not from traditional centres.

Younger millennials and GenZ accounted for 65% of new customers, and those from tier II and below cities are now 84% of new customers, the news report quoted Vijay Chandok, MD, ICICI Securities, as saying.

First-time investors are attracted by low interest rates and the rally in bourses. The Sensex has gained about 26% so far this year, while traditional fixed-income instruments have returned only 5-6%.

New margin rules

New margin rules also did not hit the level of activity, thanks to the increased participation from across the country.

Intraday trading has come down due to new margin rules, but delivery-based trading has increased drastically as most of the new clients, especially the millennials, have the capacity to hold the stocks, Sandeep Bhardwaj, CEO (retail) at IIFL Securities, is quoted as saying in the report.

To safeguard the interest of retail investors, Sebi in July 2020 notified the peak margin rules. The rationale behind the peak margins was to maintain some discipline in terms of trading, investment, brokers funding or taking leverage positions or intraday positions. As a result, the said rule is expected to keep the markets and system strong as well as efficient.