India’s brokerage industry expected to post record revenue in FY22

The increase in stock market activity since the start of the pandemic has been driven by strong corporate earnings, favorable liquidity in international and domestic markets, increased internet penetration and retailer participation, said experts.

Brokerage firms are expected to post record revenues in the current fiscal year, driven by increased retailer participation and favorable systematic liquidity. According to rating agency Icra, the industry is expected to register a total revenue of Rs 27,000-28,000 crore in the financial year 2022, registering a year-on-year (year-on-year) growth of 28-33%. However, the revenue growth rate is expected to moderate to 5-7% in the financial year 2023 with an expected total industry revenue of Rs 28,500-29,000 crore.

The increase in stock market activity since the start of the pandemic has been driven by strong corporate earnings, favorable liquidity in international and domestic markets, increased internet penetration and retailer participation, said experts. In December 2021, the total number of demat accounts increased to 80 million from 55 million in March 2021. The net addition of monthly accounts increased from 11.9 lakh in FY2021 to 28.33 lakh during of the current financial year, when it was only 4.1 lakh per month. in fiscal 2020, Icra said in the note. Moreover, the average daily turnover also increased by 126% to Rs. 63.07 trillion in the nine months ended FY2022 from Rs. 27.92 trillion in FY2021.

According to an analysis of 18 brokerage firms in the sample by Icra, the firms saw 38% year-over-year revenue growth. Additionally, the cost structure and operational efficiency of brokerage firms has also improved over the past few years, with a focus on acquiring customers through digital channels and improving economies of scale. . Brokerage firm Motilal Oswal Financial Services reported year-on-year growth of 46% and 47%, respectively, in Q2FY22 and Q3FY22, while ICICI Securities saw revenue growth of 26% and 52% in Q2FY22 and of T3FY22, respectively.

However, going forward, in fiscal year 2023, revenue for the industry as a whole is expected to experience some moderation as the revenue growth rate is expected to decline to 5-7%, with a figure of Expected total industry business of Rs 28,500 to 29,000 crore. However, Icra expects growth to remain dependent on capital market performance and maintaining returns similar to those seen in recent years.

“We expect the markets to remain volatile, going forward, amid various domestic and international signals. of derivatives during the quarter, the prolonged sluggishness in capital markets could impact the revenue of the cash segment and other related capital markets activities, which, in turn, could impact sector earnings,” said Samriddhi Chowdhary, Vice President – ​​Financial Sector Ratings, Icra Ratings.

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