Mkt mayhem leave broking houses cold; stocks fall 55-85%

Broking stocks are down anywhere between 55% to 85%. Leading brokerages like Motilal Oswal, IndiaBulls, and Edelweiss are down 75% form their life highs. Smaller brokerages like Emkay, Networth Stock Broking  are down more than 80%. These broking houses are trading just above their 52 week lows.

BSE sensitive index is down nearly 39% from its life high of 21206.77 levels. The major reasons for this down fall may be attributed to rising inflation at 11.42%, the rising interest rate scenario, redemption pressure from FII’s and Hedge funds, weak global cues, the depreciation of the rupee. Rising commodities prices especially of crude that have risen above USD 143 per barrel and other internals like political concern etc have also bogged down the markets.

The brokerage houses are facing acute problem in these market mayhem. Volumes in the market have dried up on all the three sides, i.e. BSE Cash, NSE and F&O. The average daily volumes in the market, which was at peak in January 2008, were markets were at life high have come down substantially and are almost down 40%.

Broking houses that were seeing buy orders from FII’s are now witnessing huge selling pressure from them. As there is lack of conviction among the retail portion, the participation is also low from that part. Following this low business and less participation from the investors broking houses may have to downsize to remain profitable.

- Aniket Vakharia