Financial Brokerage Market – India Financial Brokerage Market IndiaAugust 2011
Executive Summary               Average daily volumes in equity reached INR XX bn in 20‐‐‐‐‐  Market       Stock market ...
•Introduction•Market Overview•Drivers and Challenges•Drivers and Challenges•Trends•Competition•Key Takeaways    y         ...
Stock markets have  been on a downturn due to global cues  affecting financial brokerage market negatively Market Overview...
Prevailing Brokerage Structure – Indicative                                                           Type: Equity        ...
Drivers & Challenges – Summary   Drivers                                                               Challenges         ...
Trends – Summary                Trading in other platforms               Advent of foreign and new Indian players         ...
Major Players (1/21)Company Snapshot: Player 1Corporate Information                                                       ...
Thank you for the attentionThe Financial Brokerage Market – India report is part of Netscribes’ Financial Services Series....
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Market Research Report : Financial brokerage market in india 2011


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Financial brokerage market in India is going through sweeping changes with new players looking to be a part of the highly competitive brokerage market characterized by dwindling brokerage and exponential growth of brokers and sub brokers. On the other hand, many existing players have been forced to undercut operations due to lack of revenues while others still surviving on the basis of consolidation. The market is witnessing new guidelines by the regulatory authorities and new innovative offers by banks and brokerage companies.
The report provides a brief introduction to the financial broking market. The market overview includes information regarding the Indian market scenario and equity volumes on a year on year basis. An indication of the prevailing brokerage structure is included as well as highlights of the business model employed by the brokerage firms. It covers information regarding the changes in brokerage fee structure due to changes in the market. The primary guidelines stated by SEBI regarding the brokerage market are provided. The market overview section also analyses the brokerage sector as a whole to understand the opportunities and competitiveness of the market through a porter’s analysis. The overall distribution of brokers and stock brokers has also been provided.

The following section explains the major drivers in the market such as increase of income levels in tier 2 cities, under penetration of equities which can be explored by the brokerage firms to increase their brokerage. Other factors include developing franchisees to gather more revenue without having to actually spend on infrastructure. Return of FII and IPO are other encouraging factors. Rising rate of FD and other traditional saving instruments are proving to be more in vogue due to the turbulent Indian market conditions which is acting as a major challenge for the market. Global uncertainties have created huge pressures on the market. Consolidation of smaller broking firms and retail investors staying away are other important barriers that the market faces.

The trends identified are trading in mobile and online platforms along with offline modes in order to reach out to the far flung customers, new players coming in the Indian broking space making the competition even more intensive including banking institutions. Other trends include diversification of the major players in other lines of business and new innovative offerings by broking units so as to lure customers. It has been seen that broking units are also trying to hard sell demat account and bulk of the equity investments from retail customers are coming via mutual fund route. Additionally, large players are tying up with smaller players towards expanding their distribution network and to tap a larger market.

The competition section provides the prevailing brokerage structure and a comparison of the market capitalization a

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Market Research Report : Financial brokerage market in india 2011

  1. 1. Financial Brokerage Market – India Financial Brokerage Market IndiaAugust 2011
  2. 2. Executive Summary  Average daily volumes in equity reached INR XX bn in 20‐‐‐‐‐ Market   Stock market has seen fluctuations in the recent past and so have the earnings in brokerage Overview  Commodities and currency markets are steadily picking up Drivers Challenges  Rising income levels  Rising rate of FD proving to be attractive Drivers &   Under penetration of equities  Global uncertainties  Franchisee model fuel expansion h d lf l  Undercutting and consolidationChallenges  FIIs show strong return  IPOs showing strong return  Trading in other platforms Trading in other platforms  MFs pose less risk when invested for a longer MFs pose less risk when invested for a longer   Advent of foreign and new Indian  tem players  Lifetime offers by brokerage houses to lure  Trends customers  Hard selling of Demat account  Stock Brokers foray into real estate Stock Brokers foray into real estate   Tie‐ups between big and small brokers Tie‐ups between big and small brokers broking Major Players in the MarketCompetition Player 1 Pla er 1 Player 2 Pla er 2 Player 3 Pla er 3 Player 4 Pla er 4 FINANCIAL BROKERAGE MARKET IN INDIA 2011.PPT 2
  3. 3. •Introduction•Market Overview•Drivers and Challenges•Drivers and Challenges•Trends•Competition•Key Takeaways y y FINANCIAL BROKERAGE MARKET IN INDIA 2011.PPT 3
  4. 4. Stock markets have  been on a downturn due to global cues  affecting financial brokerage market negatively Market Overview – Stocks (1/2) Equity: Average Daily Volumes • In the stock market, various equity and shares of the Type 1 Type 2 Type 3 Type 4 listed companies are traded INR bn INR bn • It is also known as the secondary market 1,500 X • In India, capital markets, of which secondary market is a part of, is regulated by SEBI 1,000 W U a4% • On account of higher inflows from FIIs and FDIs, the a1% V a3% market has reacted well in 2009 10 2009‐10 500 b1% a2% b3% b2% b4% c1% d1% c2% d2% c3 d3% c4% d4% 0 20‐‐ ‐ ‐‐ 20‐‐ ‐ ‐‐ 20‐‐ ‐ ‐‐ 20‐‐ ‐ ‐‐ Geographical Distribution (Cash Segment) Turnover (Cash Segment) City 1 City 2 City 3 City 4 O Type 1 INR bn r3% Type 1 Type 2 Type 2 r2% 80,000 P 20‐‐ ‐ ‐‐ r1% N 20‐‐ ‐ ‐‐ g1% h1% k1% l1% m1% p1% e5% 60,000 60 000 e3% O i1% j1% n1% o1% 20‐‐ ‐ ‐‐ M e4% 20‐‐ ‐ ‐‐ g2% h2% k2% l2% m2% p2% 40,000 L i2% j2% n2% o2% e2% e1% f3% f5% 20‐‐ ‐ ‐‐ 20‐‐ ‐ ‐‐ g3% h3% k3% l3% m3% p3% 20,000 f4% f1% f2% i3% j3% j n3% o3% 20‐‐ ‐ ‐‐ g4% h4% k4% 20‐‐ ‐ ‐‐ l4% m4% p4% 0 20‐‐ ‐ ‐‐ 20‐‐ ‐ ‐‐ 20‐‐ ‐ ‐‐ 20‐‐ ‐ ‐‐ 20‐‐ ‐ ‐‐ i3% j3% n4% o4%Source: FINANCIAL BROKERAGE MARKET IN INDIA 2011.PPT 4
  5. 5. Prevailing Brokerage Structure – Indicative  Type: Equity Resident Indians Non-Resident Indians Delivery Based 0.a% or min INR B or x% on transaction value ( 0.d % or min INR K or p % on Trades Both BUY/SELL) transaction value (Both BUY/SELL) Type : Derivatives Futures Market 0.d % or min INR D or ceiling of e % of transaction value (Both Buy & Sell) Type: Option Market Option Market Higher of g % of the premium amount or INR.R per lot (Both Buy & Sell) Type : Currency Derivatives Currency Account opening fees of INR U Derivatives Brokerage of INR H p Contract on carry forward trades and INR D - each side on square g per y q up of trades (statutory and other charges to be levied separately). Of the total commission pool of INR A1bn  to INR A2 bn, institutional broking contributes to p% of the pool Of the total commission pool of INR A1bn to INR A2 bn institutional broking contributes to p% of the poolSource: FINANCIAL BROKERAGE MARKET IN INDIA 2011.PPT 5
  6. 6. Drivers & Challenges – Summary  Drivers Challenges Rising rate of FD proving to be  Rising rate of FD proving to be Rising income levels attractive Under penetration of equities Global uncertainties Franchisee Model fuels expansion Undercutting and consolidation FIIs showing strong return IPO showing strong return FINANCIAL BROKERAGE MARKET IN INDIA 2011.PPT 6
  7. 7. Trends – Summary  Trading in other platforms Advent of foreign and new Indian players Hard selling of Demat account Hard selling of Demat account Key  Trends ` Stock Brokers foray into real estate broking MFs pose less risk when invested for a longer tem Lifetime offers by brokerage houses to lure customers Tie‐ups between big and small brokers FINANCIAL BROKERAGE MARKET IN INDIA 2011.PPT 7
  8. 8. Major Players (1/21)Company Snapshot: Player 1Corporate Information Financial Performance RevenueHeadquarters Location 1 Location 1 Net IncomeFounded 19‐‐ A D 10 3 B C 8Products/  6 2 Product 1, Product 2, Product 3Services 4 1 2Key People Person 1, Position 1 0 0 20‐‐ 20‐‐ 20‐‐ 20‐‐Business HighlightsBusiness Highlights• The company was formerly known as A Limited and changed its name to B Ltd. in 20‐‐• Its network is spread across A1 offices across B cities as on 20‐‐• In the year 20– Company C became the subsidiary of Company A Limited  Thi This was a very strategic move as it helped Company A  to form a large network of various branches, sub‐brokers and nearly A3 clients t t i it h l d C A t f l t k f i b h bb k d l A3 li t• Of late, it has diversified into home loans under the subsidiary called Company ABC Limited under the aegis of   authority XYZ• In FY– Company A had entered into a JV with Company S Inc, to enter the life insurance segment in country I FINANCIAL BROKERAGE MARKET IN INDIA 2011.PPT 8
  9. 9. Thank you for the attentionThe Financial Brokerage Market – India report is part of Netscribes’ Financial Services Series. For more detailed information or customized research requirements please contact:Gaurav Kumar Gagan Uppal Gagan UppalPhone: +91 33 4064 6214 Tel:  +91 22 4098 7530E‐Mail: Email:  gagan.uppal@netscribes.comResearch on India is a product of Netscribes (India) Pvt. Ltd. Research on India is dedicated to disseminating information and providing quick Research on India is a product of Netscribes (India) Pvt Ltd Research on India is dedicated to disseminating information and providing quickinsights on “hot” industries in India and other emerging markets. Track our new releases and major updates in these industries onAbout NetscribesNetscribes is a knowledge‐consulting and solutions firm with clientele across the globe. The company’s expertise spans areas of investment &  g g f g p y p p fbusiness research, business & corporate intelligence, content‐management services, and knowledge‐software services. At its core lies a true value proposition that draws upon a vast knowledge base. Netscribes is a one‐stop shop designed to fulfil clients’ profitability and growth objectives.Disclaimer: This report is published for general information only. Although high standards have been used the preparation, Research on India, Disclaimer: This report is published for general information only Although high standards have been used the preparation Research on IndiaNetscribes (India) Pvt. Ltd. or “Netscribes” is not responsible for any loss or damage arising from use of this document. This document is the sole property of Netscribes (India) Pvt. Ltd. and prior permission is required for guidelines on reproduction. FINANCIAL BROKERAGE MARKET IN INDIA 2011.PPT 9