What pandemic? Records tumbled in FY20-21 in the broking business

The ongoing COVID-19 pandemic may well have affected most industries and sectors but for the stock market, it has undoubtedly been a blessing in disguise.

The financial year 2020-21, which passed entirely in the shadow of the pandemic and the ensuing nationwide lockdown, saw Indian stock exchanges report strong growth in trading volumes and turnover, with the National Stock Exchange (NSE) almost doubling its profits in FY21.

NSE registered a net profit of Rs 3,573.42 crore, up 90 percent from the previous year. Its income rose 59.14 percent to Rs 6,202.33 crore in FY21.

For BSE, however, the growth was modest with the income rising nearly 4 percent to Rs 654.7 crore, though the net profit rose 17.5 percent to Rs 141.7 crore in FY21.

Record trading

FY21 was the best ever in terms of the number of transactions in any fiscal year in the Indian equity market. Further, the huge rise in the benchmarks ensured that records were broken for other parameters such as total turnover, average daily turnover and the average trade size.

Data from the exchanges and the capital market regulator the Securities and Exchange Board of India (SEBI) showed NSE reporting a record number of trades at 4.63 billion transactions. BSE, which is the oldest exchange in Asia, registered a little over 550 million transactions – its third highest - in FY21.

The surge in transactions helped NSE registering its highest-ever average daily turnover of nearly Rs 62,000 crore. In BSE, shares worth Rs 42,000 crore changed hands daily, on average, the second-highest in any financial year.

Further, the average trade size in NSE was also a record Rs 33,205. BSE’s, in comparison, was Rs 19,000.

Market bottom, new investors helped

Market participants attributed the record-breaking trading year to a combination of factors including the surge in the secondary markets and the entry of new investors.

“There were 2-3 key triggers. The most important one was that the market bottomed out just before the lockdown began and that gave investors including the new-to-market category a lucrative opportunity to enter and invest,” said Arun Kejriwal of Kejriwal Research & Investment Services.

The financial year saw Sensex touching its all-time high level of 52,516.76 on February 16, 2021. The strong rally in the market can further be gauged from the fact that the index had touched a low of 25,638.90 in March 2020.

Essentially, the financial year saw the benchmark Sensex gaining over 20,000 points – the highest in any financial year to date. On a percentage basis, Sensex and Nifty gained 68 percent and 71 percent, respectively, with some of the broader indices like BSE Midcap and BSE Smallcap outperforming the benchmarks.

“The work from home regime gave investors more time to devote to the market. Many first-time investors came and even the existing ones who were investing rarely became active ones. The start of the rally coincided with the initial months of the lockdown and that led to individuals making good money, which brought more investors to the market,” added Kejriwal.

Brokers benefit too

The surge in new investors was further corroborated by the financial results of brokerages as well. For instance, discount broking firm 5Paisa reported 54 percent year-on-year growth in its broking income for the quarter ended March 31, 2021.

Similarly, ICICI Securities registered its highest-ever addition of clients in a single quarter in the three-month period ended March 31, 2021. Around 3.5 lakh new clients were added in the last quarter of FY21. Its broking income jumped to Rs 394.5 crore in Q4FY21 from Rs 287.4 crore in Q4FY20

Incidentally, the fiscal also saw record inflows from the foreign portfolio investors (FPIs) who are often looked upon as the prime drivers of any bull run in the Indian stock markets. As per official data, FPIs were net buyers of equities at more than $37 billion in FY21, breaching the earlier high of $25.8 billion in 2012-13.