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The broking houses having branch network in smaller towns are resorting to all sorts of cost cuttings due to dwindling footfall of investors at the broking terminals.
The plunging rupee, absence of initial public offering activity and political gridlock has eroded the investors’ confidence and this has hit the business of brokers in the tier two towns.
“While the investor confidence had been dwindling since the retrospective tax was announced by the Ministry of Finance, the reports of default at the National Stock Exchange Limited (NSEL) has been the last straw in the camel’s back”, said V Kumar, the Director at Vikson Securities Private Limited.
Vikson Securities has a network of 200 outlets in tier-II towns such as Punjab, Haryana, Himachal Pradesh, Uttar Pradesh and Gujarat.
Riding the wave of economic growth in the last few years, the small broking houses undertook aggressive expansion drives to mobilise new investors in virgin markets. But the economic slowdown and bloodbath in dalal street over the past one year has squeezed their operations. In order to cut costs, they are resorting to downsizing.
“While the equity market was becoming risky, the investors made steady transactions in commodity futures till last month. But the payment default at NSEL has eroded the faith of the investors in the futures trade also”, Kumar added.
The Chief Operating Officer of Arihant Capital Market Limited, Pranit Maheshwari told the participation of retail investors have gone down significantly.
Most of the retail investors are now indulging in intra-day trading and invest on daily basis.
Some of the investors may withdraw the funds as and when the rate of script is offered and may exit from the market, he added.
Maheshwari said the future seems to be bleak as the next quarter results of most of the listed companies are not likely to profitable.
“Since the rupee has been depreciating, the business valuations are likely to get effected, giving negative balance sheets. Moreover the lack of consensus among political parties at the parliament indicates towards more challenges for the investors”.
Another player who did not wish to be quoted said that the markets would revive only after the Lok Sabha elections and there is no solution other than wait and watch.
Due to low business volumes, we have surplus manpower and we are trying to reduce headcount as and when possible, he added.
