cash market: Lower cash market turnover, rising costs dent top brokers’ Q2 profits

Mumbai: Shrinking turnover on the bourses, mainly in the cash market segment, is taking its toll on the bottom lines of broking houses. Seven of the nine broking firms that have declared September 2022 quarter results have reported a fall in their net profits. The situation is likely to improve in the coming quarters, say market participants.
, , Securities and have seen steep declines in their profits from a year earlier. Kotak Securities, Axis Securities and have witnessed a smaller decline. Only two firms – Angel One and – which are into discount broking, have reported higher profits.

India’s stock market saw a massive shift by traders from the cash segment to options after the regulator introduced a new rule on peak margin requirements. The combined average daily cash market volumes on NSE and BSE declined 15% year on year to ₹60,162 crore in September 2022 quarter from ₹70,322 crore in September 2021 quarter.

Broking firms earn more from the cash market segment than the options segment. While they face pressures on revenue, rising staff and compliance expenses are pushing up operational costs.

ICICI Securities’ brokerage income declined to ₹329 crore in the September quarter from ₹393 crore a year earlier, which it blamed on a fall in retail equity volumes. Overall net profit fell 14% on-year to ₹300 crore. The firm, though, is optimistic about the growing Indian equity cult. “There may be short-term moderation in growth and market opportunities, but the runaway is long,” managing director Vijay Chandok said. “We see multi-year tailwinds in the form of increasing financialisation and digitisation of savings, continued entry of large numbers of youth in the job market every year, and rising affluence, and we are uniquely positioned to serve the evolving needs of our customers.”

At IIFL Securities, net profit fell nearly 23% on-year to ₹55.5 crore in September 2022, even though revenue rose 6% to ₹317 crore. Managing director R Venkataraman said employee costs for the company increased 17% from a year earlier because of higher headcount and annual rise in compensation. However, he believes the broking business has started gaining momentum and is expected to grow in the second half of the current financial year.

Axis Securities reported a 17% fall in net profit to ₹100 crore for the half year ended September 2022.

Most broking firms’ employee costs have risen drastically in the September quarter. For

and IIFL Securities, it increased by 17% each, while for ICICI Securities it rose 10%.

Meanwhile, Angel One reported a 59.7% jump in net profit to ₹213.56 crore in the past quarter. Chairman Dinesh Thakkar said digitally enhanced products and deployment of advanced technology enabled the addition of over one million clients for six quarters in a row.

For the majority, though, it is still a tough market. The plight of small broking companies is worse, as they struggle to meet their margin obligations due to liquidity constraints.

The woes are reflected in the share prices of broking firms as well. ICICI Securities stock has declined 13% in the last six months, while IIFL Securities is down 30% and Motilal Oswal has plunged 22%.

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