The stock market volatility in the month of September has taken toll on the earnings of brokerages as reflected in their second quarter results ending on September 30, 2011. Net profits have halved and net sales figures declined for most of the brokerages.
Take for instance India Infoline Limited. The net profit more than halved, year on year, to Rs 22.5 crore from Rs 54.9 crore. Equities, broking and related revenues amounted to Rs 138.8 crore in the second quarter, down 15 per cent year-on-year and up 3.7 per cent quarter-on-quarter.
Geojit BNP Paribas' net profit for the second quarter of the fiscal declined 14.5 per cent to Rs 6.05 crore from Rs 7.08 crore on a year-on-year basis. A 60.2 per cent decline was seen in the net profit of Edelweiss Financial Services.
The extreme volatility led to a lot of dormancy among regular retail investors, and this is the main reason for the brokerages posting poor financial results for the last quarter, said stockbrokers.
According to BSE statistics, the July-September quarter saw an average daily turnover of Rs 2,700 crore much lower than the June quarter's Rs 3,100 crore and March quarter's Rs 3,400 crore. Similar trend was visible in number of trades also.
“Investment in expansion of gold loan branches, lower broking margins and higher interest costs impacted results adversely,” said a note from India Infoline on its second quarter results.
Mr C.J. George, Managing Director, Geojit BNP Paribas said, “The decline in the stock market volume continues to be a matter of concern to us. Once the global financial and commodities markets settle down, we expect a sharp recovery of volumes in the Indian stockmarkets.”
South based JRG Securities has posted a net loss of Rs 2.81 crore in the quarter ending September. The brokerage reported a net profit of Rs 1.28 crore in the corresponding quarter last year. Similar is the case of Aditya Birla Money which posted a net loss of Rs 2.9 crore in the last quarter. The net profit in the corresponding quarter last year was Rs 1.5 crore.
“This is a tough time for brokerages. Weak cues in the global markets and the depreciating rupee have lowered trade volumes of FIIs. People who used to make 50 trades a day are not even making two trades. Brokerages make 95 per cent of their income through equity trading. This explains why brokerages have declining profits in this quarter,” said Mr Abhinav Angirish, Founder and CEO, Invest Online.
However on a sequential basis, the quarter ending September 30, 2011 has not been the darkest for some brokerages. Motilal Oswal Financial Services, Geojit BNP Paribas and Aditya Birla Money have performed better in the quarter ending September than in the previous (ending June) quarter. Motilal Oswal Financial Services posted a net profit of Rs 21.18 crore in the quarter ending June against Rs 34.95 crore in the September 2011 quarter. Aditya Birla Money reported a net loss of Rs 6.15 crore in the June quarter; the loss narrowed to Rs 2.9 crore in the September quarter.