Brokerage firms laugh to the bank as trading volumes surge

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The surge in stock trading volumes with increasing retail participation in the cash segment will be accretive for brokerage firms, given the higher returns associated with these segments.

Interestingly, the domestic capital market has seen an unexpected increase in the current fiscal year, in stark contrast to the overall economic outlook.

Stock markets saw a 24% increase in overall revenue to ₹1,719 lakh crore in the first five months of this financial year from ₹1,366 lakh crore recorded in the same period last year. The average daily turnover increased to ₹16.69 lakh crore from ₹13.26 lakh crore during the same period. It hovered around ₹14.39 lakh crore last fiscal year.

The cash segment has outperformed the industry in terms of volume growth with revenue of ₹63 lakh crore (₹37 lakh crore) through August this financial year.

The average daily turnover in the cash segment more than doubled to ₹0.61 lakh crore (₹0.36 lakh crore) in this fiscal year to August. Average daily turnover in the derivatives segment increased by 25% to ₹16.08 lakh crore (₹12.91 lakh crore).

Interestingly, the average daily turnover remained subdued in April and fell by 2% to ₹12.02 lakh crore from March. Thereafter, there was a steady increase in trading volumes for reasons well known to investors.

Samriddhi Chowdhary, Vice President, Financial Sector Ratings, ICRA, said the option of working from home (WFH), coupled with limited investment opportunities given the difficult economic environment and attractive valuations after the strong fall in March, helped spark investor interest in capital markets. .

The top 20 brokerages together assigned about 77% of total active clients in June. However, discount brokerages have overtaken traditional brokerages in attracting new accounts, supported by their technology-driven business model. Margin funding activity of the top 11 brokerages increased by 30% to ₹6,100 crore in June compared to March. The book is expected to rise further as brokerages seek to expand the margin funding business to increase profitability.

Chowdhary said trading volumes may moderate in the coming months from the peak in July given the difficult macroeconomic and geopolitical scenario.

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