Anticipated Changes and Evolution in Indian Stock Broking Industry

Topics: Financial services, Broker / Pages: 8 (1804 words) / Published: Apr 15th, 2009
Anticipated Changes and Evolution in Indian Stock Broking Industry

The recent hiatus in the Indian Bull Run will compel the stock broking industry towards changes it needs and has been silently yearning for. Forthcoming adjustments will span much expected areas such as consolidation, realignment of client acquisition and retention strategies along with drifts in regulations in conjunction with the much discussed shift between commission and fee based income.

From a peak of 21,206 on January 10, 2008 on the BSE Sensex to a subsequent decline to a low of 7,697.39 on October 27, 2008, the journey of financial markets in India has been capricious. With FII’s making a net sale of $ 10.9 bn during 2008-09 (uptil January 16, 2009) as against net purchases of $15.8 bn in the corresponding period of the previous year the bolt of volatility experienced left even experts flummoxed and raised concerns towards the ability of brokerage firms to deal with the cyclical sways of the stock markets.

The Indian broking industry is reasonably large and fragmented with 9,000 odd brokers in the cash segment and around 24,000 sub-brokers. The market share of the top ten brokers in India has remained largely stagnant in the past four years. The top five brokers in India still control around 15-16% of the market share. Historically, retail trading contributed around 60% of the market and FII’s averaged around 20%.

Key developments in this industry included conspicuous expansion in distribution pan India with greater diversity offered in financial product offerings and an increased emphasis on proprietary research output. There was a greater than before interest towards engendering a global footprint.

With over half of financial savings still in bank deposits and equity assets comprising of only 6% of household financial savings the under penetration and relative financial illiteracy continue to ensure the allure of financial services segment in the country.

The recent

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