The rising tide of foreign institutional investor (FII) inflows has made institutional equities the focal point for broking firms. Several of them are hiring in a bid to expand in a market which is growing over 40 per cent annually. Traditionally the domain of foreign brokers, the institutional segment is getting more attention from domestic players on the back of institutional players’ huge appetite for Indian equities.
Sample this: Indiabulls Securities, which until recently was only into retail broking, has forayed into institutional equities. It has hired Ajay Bhatia from Macquarie Securities. While Reliance Securities has acquired Quant Capital, which is mainly into institutional broking, Religare has hired Manoj Singla and Suhas Harinarayan for its institutional broking team.
Martin Newson, chief executive, global investment banking business, Religare Capital Markets, said, “We are definitely ramping up our institutional segment as we believe it is important for our global footprint in investment banking. We are trying to build best-in-class research and world-class execution facilities. I do agree that there is an intense competition in the institutional equities segment in India, but my view is that the market share of foreign brokers will fall over the next three years”.
“Considering that asset allocation to emerging market equities is far less than the desired level, I see more money flowing into India in the days to come”, he said.
The foreign brokers are not behind. Citi India recently expanded its India equities team by hiring nine top executives. These include Keshav Sanghi (MD and deputy head of equities), Richard Macfarlane (MD and head of execution services) and Vandana Luthra (MD of equity sales). Nomura has appointed Nipun Goel as head of investment banking and Nitin Jain as co-head of fixed income.
As a result, competition in the institutional broking space has become intense, with domestic and foreign brokers slugging it out for market share. However, experts say there is enough for everyone as the pie is getting bigger. At present, institutional investors account for only 15 per cent of the market volume. This means there is a huge potential for growth. And with retail participation not coming in a major way, brokers with strong institutional presence have become big.
“Foreign brokers contributed to 60 per cent of institutional trades. But going ahead, the pie will get equally divided between foreign and domestic brokers as more domestic brokers ramp up their teams and research capabilities. Institutional volumes have grown faster than retail volumes over the last ten years, so it makes sense. It is not just FIIs. Most retail investors are expected to come through mutual funds and insurance, which will further boost the institutional business,” said Pankaj Agarwal, a research analyst at Noble.
Some large domestic players in institutional broking are Edelweiss, India Infoline, Kotak Securities and Motilal Oswal. India Infoline is also looking to hire more people for the institutional segment to ramp up research.
