Downturn Woes: Stock Broking Business

Business Line, Various Dates.

Broking houses cut salaries, lay off staff

Feb.10: Mr Amit Sharma (name changed), a departmental head at a large retail brokerage in Mumbai, had to take a 35 per cent pay cut last week.

Rising costs and falling revenues are forcing broking houses to delay salaries, cut pay packets and even lay off employees. Some brokerages are even contemplating winding up business.

Experts said that another Y2K kind of scenario could emerge. “All of a sudden, my inbox is flooded with CVs of overqualified people willing to work for any price,” said the Head of Research of an Indian Brokerage. “Retrenchment had already started two to three weeks ago,” he added.

Many brokers were willing to speak on the issue but none wanted to go on record.

“The market has become over-brokered,” said Mr Prakash Diwan, Head – Institutional Equities Networth Stock Broking. “Only those with deep pockets and the ability to service clients while operating in a low-cost regime will survive.”

Drop in daily turnover

Meanwhile, the average daily turnover in the cash segment of NSE has seen a significant drop (see table) and so has the average ticket size of trades.

“When markets fall like this, the first impact is felt by employees,” said Mr Kishor Ostwal, CMD CNI Research. “Many brokerages are not paying salaries on time and if this downward trend continues for another 10-15 days, major layoffs across the board are sure to occur,” he added.

Many small brokers catering to the retail investor are also thinking of shutting shop, said market experts. Employees in sales, dealing and research in many brokerage houses have been served a three-month notice and asked to look out for other opportunities, said the Head of Research at a broking house.


Brokerages eye innovative acquire-and-hold strategies

Feb.22: Faced with increasing competition and falling volumes in the equity market, brokerages are looking at innovative ways to get and retain customers.

Take New Silk Route promoted Destimoney Securities. It has launched a “No Brokerage Day” that it says is aimed at diamond traders of Mumbai. The broking firm will offer customers one day’s fee waiver if they trade for five days of the week.

This is part of the brokerage’s strategy to acquire more customers, said Mr Sudip Bandopadhyay, President of Destimoney. The broking firm will be looking at large investors like diamond traders, who trade on a daily basis.

“Our aim is to get at least 10 per cent of the 5,500 diamond traders in Mumbai by the end of March.” Destimoney has opened more than 100 new accounts in the last 15 days, said Mr Bandopadhyay.

Broking firms that are focused on the retail business are finding it tough to hold ground in such hard times. Competition in the broking space is increasing while technology improvements have shrunk the role of intermediaries, said Mr G. Chokkalingam, Executive Director and CIO, Centrum Wealth Management.

“Firms are moving from pure commodities-based or broking-based business to other activities that provide better margins. Centrum is looking at strengthening its wealth advisory, as this is a space with good margins. We have formed a new team and will be looking at targeting Ultra-High Networth individuals and owners of small and medium enterprises. We will work with them and help them create more wealth,” said Mr Chokkalingam.

Mr Vinesh Menon, Deputy CEO, Online Investments & Stock Broking, Bajaj Capital, said his company offers customised tariff. “We leverage the investment allocation needs of our retail clients by offering research-based advice to invest in value stocks in the secondary markets as an additional investment choice and also have the product solutions and services that cater to high volume trading clients.”

2 thoughts on “Downturn Woes: Stock Broking Business

  1. balakrishnan.g

    Now only you are reporting about the salary cut.

    But in and around Madurai District, if you are in broking business you will not get girl for marriage.

    This is for your kind information sir


  2. MarketFastFood Post author

    The large brokerages generally cannot survive even 3 months of market downturn. Brokerages focussing more on daily trading volumes will generally have high overhead costs and a fall in market pinches them a lot.
    Large Need Not Always be Good!



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