Shares of leading stock broking firms decline
Wednesday, 12 May 2010
MUMBAI, May 11 (Economic Times): Shares of key broking firms are still quoting 20-50 per cent below their yearly highs seen between June and October last year, when the market was soaring.
In comparison, the market has risen by 8 per cent over the past six months and is just 4 per cent below its 52-week high seen in January this year.
Ideally, share trading firms are seen as a proxy on the stock market, as their revenues are directly linked to the action on the bourses. But rising competition and dipping trading volumes are taking a toll on these firms.
Shares of leading stock broking firms have fallen 10-30 per cent in the past six months, while benchmark indices have been steady.
"Revenues across the industry have come down because of price (broking fee) wars and a range-bound market," said a senior official at an unlisted broking house, requesting anonymity.
Broking houses are no longer getting the fancy price-to-earning multiples they used to enjoy during the bull phase of 2006 and 2007. While the market has more than doubled from its lows, the rise was marked by periodic corrections, unlike in 2006 and 2007, when corrections were few and far.
Average daily cash market turnover on the Bombay Stock Exchange and the National Stock Exchange combined was Rs 250-300 billion when the market was in the bull grip three years ago. The figure is now down to Rs 150-180 billion.
"Cash market is now the bigger driver for most broking houses; but today, most of the large broking houses have become more dependant on NBFC operations," said Amit Rathi, MD, Anand Rathi Financial Services.
In comparison, the market has risen by 8 per cent over the past six months and is just 4 per cent below its 52-week high seen in January this year.
Ideally, share trading firms are seen as a proxy on the stock market, as their revenues are directly linked to the action on the bourses. But rising competition and dipping trading volumes are taking a toll on these firms.
Shares of leading stock broking firms have fallen 10-30 per cent in the past six months, while benchmark indices have been steady.
"Revenues across the industry have come down because of price (broking fee) wars and a range-bound market," said a senior official at an unlisted broking house, requesting anonymity.
Broking houses are no longer getting the fancy price-to-earning multiples they used to enjoy during the bull phase of 2006 and 2007. While the market has more than doubled from its lows, the rise was marked by periodic corrections, unlike in 2006 and 2007, when corrections were few and far.
Average daily cash market turnover on the Bombay Stock Exchange and the National Stock Exchange combined was Rs 250-300 billion when the market was in the bull grip three years ago. The figure is now down to Rs 150-180 billion.
"Cash market is now the bigger driver for most broking houses; but today, most of the large broking houses have become more dependant on NBFC operations," said Amit Rathi, MD, Anand Rathi Financial Services.