Brokerage Income Falls As Volumes, Prices Nosedive

Mumbai, June 29 | Updated: Jul 1 2004, 04:21am hrs
The equity brokerage income has fallen by over 50 per cent in the last three months as the volumes and stock prices on the bourses have declined by about 50 per cent and 40 per cent, respectively.

Since brokers charge fees to clients based on variables of volume and value of the transaction, decline at both fronts have hit the margins. The benchmark Sensex has declined 899.47 points or 18.58 per cent to 4841.31 points on June 29, 2004 from 5740.85 points on April 1, while the broader S&P CNX Nifty has declined by similar percentage to Tuesdays close of 1518.30 points (down 301.35 points or 19.85 per cent from 1819.65 points on April 1).

The combined daily volume of both The Stock Exchange (BSE) and the National Stock Exchange (NSE) has fallen by one third to Rs 5000 crore in June from Rs 7250 crore in April. The average number of shares traded daily on the NSE had declined from about 26 crore shares in April to 18 crore shares in June.

While on the BSE, the average number of shares traded has declined from about 13 crore shares to about 8.33 crore shares.

The markets have witnessed volatility in the recent past. However, after the installation of the new government at the Centre, the turnover on both the domestic bourses have witnessed a continuous decline since January 2004. This has adversely affected the broking income of the stock brokers, which witnessed a drastic fall. According to one estimate, it has fallen over 50 per cent for variety of reasons including the fall in share prices and dipping turnover.

S T Gerela, CEO, Satco Securities, said: Despite the brokerage rates being steady, the brokerage income has slipped by over 50 per cent following a sharp fall in stock prices and trading volumes.

Reduced activity from foreign institutional investors (FIIs) has played a significant role in dismal trading turnover performance on the bourses. Dinesh Thakkar, managing director, Angel Stock Broking Ltd said: With the new government taking over at the Centre, FIIs have adopted wait and watch policy, which in turn has driven retail investors away from the market. As a result, the turnover on the bourses has nosedived impacting the brokerage income.

Stock brokers charge different brokerage rates to different set of clients. The retail client of the broker is charged different rate of brokerage vis-a-vis its institutional counterpart. The brokerage charges for retail investors range from 0.20 per cent to 0.75 per cent of the trade value, while for institutional investors it ranges from 0.10 per cent to 0.50 per cent.

The average turnover on both the bourses The Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) has started falling gradually. The average daily turnover on the NSE in January 04 was Rs 6,393.75 crore and the daily average of number of shares traded were 34.92 crore.

On the BSE, the daily average turnover was Rs 3,124.78 crore and the shares traded were 20.64 crore. In February 04, on the NSE, the turnover dropped to Rs 5,722 crore and the shares traded on a daily average of 24.47 crore, while on the BSE, the average daily turnover came down to Rs 2,708.61 crore and the number of shares traded on daily basis were 12.82 crore.

In March 04, the NSE recorded average turnover of Rs 4,767.40 crore, while the daily average of number of shares traded came down to 20.27 crore shares. On the BSE, the daily average turnover came down to Rs 2,308.44 crore, while the daily average of number of shares traded were 11.25 crore. In April 04, on NSE, the average daily turnover stood at Rs 4,981.84 crore and the number of shares traded were 26.68 crore, while on the BSE, the daily average turnover was Rs 2,252.47 crore and the average number of shares traded on daily basis were 12.54 crore.

In May 04, the NSE recorded average daily turnover of Rs 4,710.47 crore and the average number of shares traded on daily basis were 26.02 crore, while the BSE recorded average daily turnover of Rs 2,187.50 crore and the average number of shares traded on daily basis were 12.34 crore. In June 04, the daily average turnover of the NSE stood at Rs 3,782 crore and the average number of shares traded were 18.34 crore, while on the BSE the turnover was Rs 1,637 crore and the daily average of shares traded were 8.33 crore shares.