Posts Tagged ‘brokerage houses’

Global Slowdown Caused Slump in Growth Rate of the Demat Accounts

Global Slowdown Caused Slump in Growth Rate of the Demat Accounts

 

Despite the blistering pace kept by the equities market in the past 10 months, the rise in the number of new retail investors has slowed down.

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According to the data from National Securities and Depositories Limited, the growth rate of demat accounts has declined to 6 per cent, compared with 13 per cent last year.

Experts attribute this to the overall slowdown in the economy.

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As per experts a prolonged, dull phase in 2008 made investors jittery about investing in the equities market.

Also, as many individuals were scared of losing their jobs, so they did not intend to invest more.

There has been an average growth of 14.75 per cent in investors opening demat accounts till 2008.

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Financial intermediaries such as broking companies, whose fortunes are directly linked to the markets, have witnessed subdued sentiments in the equity space from retail investors.

Experts cited 2008 market crash and the global financial meltdown as the reason for this negative development.

Moreover recession of last year had demotivated and scared the retail investors good enough to drive them away from the further investing.

This caused enormous loss for Financial intermediaries and most of the brokerage houses had to shut shop and retrench many staff too.

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“The confidence of the retail investors is yet to be restored. Even in the case of new initial public offerings, only the institutional part is getting oversubscribed,” said Jagannadham Thunuguntla, head of research at SMC Capitals.

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IFAs tying up with Brokerage Houses to turn Sub-Broker :)

IFAs - Sub-Broker

IFAs tying up with Brokerage Houses to turn Sub-Broker

 

Independent financial advisors (IFAs) are tying up with large distributors and brokerage houses to act as sub-brokers, to keep themselves afloat after the entry load ban on mutual funds.

Earlier, IFAs used to make most of their earnings by selling fund schemes.

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A sub-broker is a person who acts on behalf of a stock-broker as an agent, or otherwise for assisting the investors in buying, selling or dealing in financial products through stock-brokers.

Many independent financial advisors have approached the company asking it to create a platform through which they can offer advisory services to their clients.

There is a plan by companies also to launch such a platform in coming weeks.

Broking industry representatives said that IFAs have been left with no option but to tie up with large brokerage houses after they have been denied of their basic source of income (2.25 per cent entry fee on mutual fund investment).

Brokerage Houses are set to provide them with basic infrastructure and resources to provide investors advisory services.

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IFAs are now required to charge a fee for providing their advisory services, instead of a commission on each transaction that they received earlier.

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The Securities and Exchange Board of India (Sebi) had asked mutual fund distributors not to charge any entry load with effect from August 1. It had instead asked them to charge as per the service provided.

It means that a distributor cannot charge any fee for merely selling a product but can charge only if they offer advisory services to investors.

The new norm has queered the pitch for thousands of independent financial advisors, who used to make their earnings by merely selling mutual fund products.

Jagannadham Thunuguntla, equity head of Delhi-based brokerage house SMC Capital, said that the entry load ban has come as blessing in disguise for large brokerage and distribution houses.

“Most of the mutual fund business would now be routed through big distribution houses as IFAs struggle to provide the necessary advisory service on their own.

The sub-broker model is one of the few viable options available with the small financial advisors,” he added.

When asked if IFAs approached SMC showing their interest in becoming sub-brokers, Thunuguntla said that though inquiries were not so aggressive, they expect more IFAs to come seeking their help as the time passes.

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Telecom Stocks Continues To Plunge Down :(

Shares of telecom companies continued to decline amid the ongoing tariff war

Shares of telecom companies continued to decline amid the ongoing tariff war

Shares of telecom companies continued to decline amid the ongoing tariff war and the losses of market leaders like Bharti Airtel and Reliance Communications so far this month almost at par.

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Since the tariff war started, Bharti Airtel, which enjoys the largest market share, has declined over 23 per cent, while Anil Ambani led Reliance Communications has tanked nearly 31 per cent on the Bombay Stock Exchange.

Telecom stocks are continuously coming down.

The per second plan would act negatively for these companies and accordingly most of the brokerage houses have downgraded the sector.

Regarding RCom, experts said “the slide in the stock was more to do with the tariff war than the audit report and the fact that the company changed from CDMA to GSM also strained its balance sheet.”

Since October 5, shares of Idea Cellular has plunged 13.32 per cent, while the scrip of  Tata Teleservices Maharashtra was down 3.37 per cent.

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“In the midst of the tariff war, the face of telecom industry is changing, the telecom story is being re-looked by the investor community.

The winner in this case is customers and the losers are the companies.”

SMC Capitals head of equity Jagannadham Thunuguntla said.

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Earlier this month, telecom regulator mooted the plan to ask all the operators to consider per-second pulse as a mandatory tariff option along with their other tariff plans.

Paying tariff based on usage per second instead of the current per minute pulse, would heavily impact the profitability of the telecom operators and on these concerns shares of all major telecom companies slipped into the red.

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As subscriber base numbers are also significantly down both in terms of pan India level and individual company wise, it would also affect the share price of the telecom operators significantly.

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