At a time when most brokerages in this country are struggling due to shrinking cash market volumes and low commission, several foreign firms are betting big on India. Foreign majors such as Daiwa, Jefferies, Barclays, RBS, Espirito Santo and Newedge have hired senior and mid-level executives in the past three months and plan to add more, to get part of the pie in Indian stock broking.
Daiwa Securities has hired a number of people in recent months for its equities team in India. Japan’s second largest brokerage is in the process of adding more specialists in sales, trading and research. In May, it got Alok Vajpeyi as managing director and senior head of equities. Last month, it hired Sriram Iyer from Antique Stock Broking as executive director and head of sales trading.
“Daiwa is very serious in its commitment to building its Asian business and India is a key priority,” said Vajpeyi, who was instrumental in setting up Dawnay Day AV. “Market cycles can’t determine longer term strategy. We believe the equities business will be a strong business for the future and Daiwa wants to be a top player in the sector in India.”
Last month, Jefferies set up a full-service equity broking business in India. It has appointed Kunal Bajaj as head of India equity sales and Govind Chellappa as head of India research. The US-based firm has also made key hires in the areas of operations, finance and compliance who would join in the coming weeks.
LONG VIEW This expansion by foreign brokerages comes at a time when cash market volumes have been consistently falling and commission rates have come down. The combined cash market daily average turnover has dropped 28 per cent since 2009. Commissions have fallen in the past three years from 25p to 5p per Rs 100 turnover. Derivative commissions have also more than halved in two years.
“There are challenges in the short term. However, international brokerages, which are expanding their businesses in India, are taking a long-term view,” said Nick Paulson-Ellis, country head–India, Espirito Santo Securities. “At present, the country's stock market is the ninth largest in the world in terms of market capitalisation. That won’t be the case in 10 years time, when it is likely to be among the top five in the world. The Indian market is critical to international brokerages to remain relevant to their clients,” he added.
Espirito Santo Securities is planning to hire 15-20 people across research, sales and trading. “This type of market is good for firms in build mode, as it is more conducive to hiring and retaining people if you can show you have a serious long-term commitment and distinctive position,” said Paulson-Ellis.
British bank RBS has also been aggressively expanding its India equity team. Devesh Kumar joined as head of equities in April. Sanjeev Patni has come from Prabhudas Lilladher, while Varun Pardiwala from Daiwa Securities has also come on board. Sameer Goyal (Indiabulls Securities) and T S Baskaran (ICICI Securities) have also joined RBS in the recent past. Two others from Indiabulls Securities and one from Daiwa have been inducted in the research team.
Early this week, Barclays Capital roped in Bhavtosh Vajpayee from CLSA to head its India equities business. The investment banking unit of Barclays Bank expects to set up equities sales, trading and research businesses in India by the end of 2011 and plans to hire more staff.
Newedge, one of the world’s largest futures brokerages, is also upbeat on India. It recently appointed Sujit Kadakia to head its Indian unit. New electronic facilities like direct market access and co-location facilities are set to raise Indian futures and options volume to a new height, Kadakia says.
Industry players say foreign entities have an upper edge over domestic counterparts, as the former can spread costs across regions. This assumes significance when seen in the light of falling revenues of most Indian brokerages.
“The broking business requires deep pockets, as investors look for full services group that offer different products,” said the equities head of a foreign brokerage. “Multi-market players are also able to spread costs across countries in which they are present. On the other hand, domestic entities see the entire cost pressure on a single entity,” he said.
With contributions from Reghu Balakrishnan & Ashish Rukhaiyar
