Broking firms reported mixed earnings for the first quarter of the financial year 2014 even as their core broking operations continued to remain under pressure, owing to a fall in cash volumes and volatile equities.
IIFL and Edelweiss saw their net profit for the quarter ended June 2013 rise 21% and 40%, respectively. Motilal Oswal, on the other hand, saw its profits decline 8.6%. Emkay Global Financial Services cut its losses to Rs 1.7 crore in the June quarter from a loss of Rs 2.14 crore in the year-ago period. Geojit BNP Paribas was an outlier, as its net profit rose 94% on a low base to Rs 16.5 crore, mainly on account of the sale of its institutional business.
Income from core broking operations continued to remain under pressure. For instance, broking and related revenues for Motilal Oswal stood at Rs 80.3 crore in Q1FY14, down 3.5% from the same period in the previous fiscal. For IIFL, capital market and related fee, which includes income from equities, stood Rs 127.6 crore in Q1FY14, up 2% y-o-y but down 15% quarter-on-quarter. The BSE Sensex rose about 3% during the quarter.
“After seeing positive returns in April, the markets saw significant stress in the last two months on the back of currency and current account deficit worries which impacted investor interest in equities. Volumes in the high-yield cash delivery segment remained depressed, while the low-yield options segment continued to push up equity market volumes,” said Motilal Oswal, chairman and managing director at Motilal Oswal Financial Services, while reviewing the business performance in the quarter. “Primary market activities remained largely muted and growth in new investor accounts slowed down,” he added.
The share of options trading as a percentage of the overall market volumes rose to 78% in the June quarter, up from 76% in the previous quarter. The average turnover in the cash segment fell by nearly 10% in the June quarter over the previous quarter and rose by more than 12% for the F&O segment.
Brokerages felt the pinch of rising employee costs as well. Y-o-Y, staff costs of Motilal Oswal, Geojit and Edelweiss rose 17%, 18% and 33%, respectively.
Some of the large brokers continued to benefit from their growing lending business. For example, Edelweiss’ total credit book,