Brokerages make hay while sun shines on markets

Written by Jash Kriplani | Mumbai | Updated: Oct 29 2014, 07:42am hrs
Revenues from market-related activities have shown a strong growth for the domestic brokerages in the September quarter amid the steady rise in the market volumes.

Motilal Oswal Financial Services clocked revenues to the tune of Rs 123.65 crore from broking-related activities in the quarter, over 70% jump y-o-y. Edelweiss Financial Services revenues from fees and commission jumped 45.23% y-o-y to Rs 127.5 crore.

For Geojit BNP Paribas Financial Services, on a y-o-y basis, revenues grew 58.34% to Rs 70.32 crore, but on a sequential basis earnings were down 9%. IIFL Holdings saw income from capital-market activities rise 30.6% y-o-y to Rs 111.73 crore.

Brokerages attribute the rise in volumes as the primary reason for the continued traction in the capital-market related activities. The significant increase in the market volume has helped Geojit BNP Paribas achieve better results. In the quarter, the company added 14,000 new customers, said CJ George, the managing director, Geojit BNP Paribas.

In September, the combined market turnover including F&O and cash across BSE and NSE touched lifetime high of Rs 8.52 lakh crore. The daily average market turnover in last 5 months has been in excess of Rs 3 lakh crore. The average turnover in October stood at Rs 3.26 lakh crore at the end of Tuesday's trading session.

Ambit Capital, which tracks Motilal Oswal Financial Services, has revised its target price for the stock following the brokerages Q2 results. With signs of an uptick in cash volumes and retail volumes coupled with some ease in the competitive intensity in the retail segment, we reiterate our buy stance on the Motilal Oswal Financial Services stock with a revised target price of Rs 263 a share, Aadesh Mehta, Pankaj Agarwal and Ravi Singh of Ambit Capital said in a research report.

Motilal Oswal, CMD, Motilal Oswal Financial Services expects participation from retail investors to improve. Retail participation has seen a traction this year, which is encouraging. As the IPO pipeline gains further momentum, it should ideally bring in more retail participants into the markets as they seek to benefit from the opportunities.

Brokerages' profitability have also seen an improvement in the September quarter with IIFL Holdings seeing its net standalone profit rise 1,075% on a y-o-y basis to Rs 91.46 crore. The Ebitda margin has improved by 15.66 percentage points. Motilal Oswal Financial Services saw its net profit rise 169.75% y-o-y to Rs 43.16 crore with Ebitda margins improving by 7.44 percentage points.