The broking industry is poised to achieve record-breaking revenues and net profits in the fiscal year 2024, propelled by a resurgence in investor sentiment, as indicated by a report from ICRA, a leading rating agency.
Strong Growth Trends in Broking Industry During H1 FY2024
Analysing data from 29 prominent brokerage companies in the first half of FY24, the report unveils a substantial 20 percent annualised growth in net operating income, attributing the surge to an upswing in market activity.
Improved Broking Industry Profitability and Positive Returns in H1 FY2024
The aggregated profitability of the sample set witnessed a noteworthy improvement, with a 24 percent annualised increase in net profit and a robust return on equity reaching 27 percent in H1 FY2024. Projections from the report suggest an 18-22 percent increase in broking industry revenues and a 22-25 percent rise in net profits YoY for FY24.
Recovery in Secondary Market Returns and Foreign Investor Confidence
The ICRA report highlights a recovery in secondary market returns in the current fiscal, with major benchmark indices hitting new highs. Sustained participation of domestic investors and a shift in foreign portfolio investors and foreign institutional investors from net sellers to net buyers in the first 10 months of FY24 contributed to this positive trend.
Positive Outlook for Retail Participation and Market Activity
Deep Inder Singh, Vice President – Financial Sector Ratings at ICRA, emphasizes the expansion of the active National Stock Exchange (NSE) client base, driven by a revival in primary market activity and improving secondary market returns. The report predicts sustained retail participation with a healthy IPO pipeline contributing to market exuberance.
Surge in Cash Segment Turnover and Margin Trade Funding
The cash segment’s average daily turnover rebounded by 27 percent in H1 FY2024, reaching Rs. 0.73 lakh crore, and the margin trade funding (MTF) segment experienced significant growth, rising by 98 percent from March 2023 to ₹51,000 crore on December 28, 2023.
Robust Retail Investor Engagement in Futures & Options Segment
Retail investors continue to actively participate in the futures & options segment, driven by various factors, including new index options, miniaturisation of contracts, and separate weekly expiries for each index option. The number of contracts traded has increased substantially, reflecting strong retail investor engagement.
Broking Industry’s Resilience and Untapped Growth Potential
Despite potential short-term impacts on retail investor participation, ICRA suggests the broking industry’s resilience. The modest share of the equity segment in household savings indicates untapped potential for sustainable growth over the long term.
Evolving Market Dynamics and Brokerage Entities’ Financial Leverage
The report notes evolving market dynamics with an increase in financial leverage for brokerage entities due to the material scale-up of the MTF and heightened working capital requirements. Borrowings by brokerage entities have seen an increase, with different categories of brokers experiencing varying levels of financial leverage.
Unlocking Opportunities in the Broking Industry for Traders and Investors
The broking industry is getting ready for some really good times in the financial year 2024. This means there are a bunch of exciting chances for people who trade and invest money.
As the money comes in and the profits are expected to grow, traders can look at different ways to make more money. The happy conditions, shown by more regular people taking part and a strong plan for new companies to join the stock market, suggest a positive direction for people who want their money to grow steadily. This time of big growth gives a chance for smart moves and good choices, asking both experienced and new market players to deal confidently with the changing financial world.
In summary, the broking industry is on track to achieve remarkable milestones in FY24, driven by positive market dynamics, increased investor confidence, and evolving trends in financial leverage among brokerage entities.
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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.