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Indian brokerage industry to see weak growth in 2018-19, says ICRA

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FPI flows are expected to remain muted in this fiscal.

Indian brokerage industry to see weak growth in 2018-19, says ICRA
Country’s brokerage industry is likely to see a week growth in revenue rate and profitability in this fiscal due to cautious investor sentiments and market volatility, said a report.
The industry is expected to post a moderate growth of 5 to 10 percent in the ongoing financial year, according to a report by rating agency ICRA.
In the previous fiscal, the industry had grown at over 30 percent, with a turnover of Rs 18,000-19,000 crore.
The industry would garner Rs 19,500-20,000 crore revenue in the same period on the back of the strong performance in the previous fiscal that saw industry turnover of Rs 18,000-19,000 crore and year-on-year (Y-o-Y) growth of over 30 percent, the report said.
It said, while on one hand, the volatility in the markets is expected to encourage trading turnover, on the other, the recent corrections in valuations, coupled with the cautious investor stance, would have a bearing on industry revenues in the current fiscal.
The report said the domestic capital markets are expected to remain rangebound over the near term with a prolonged period of volatility given the weakening of investor sentiment and challenging domestic and global cues.
Going forward, the foreign portfolio investment (FPI) flows are expected to remain muted, with a net outflow of USD 8-10 billion in FY19 compared to inflows of $4 billion in FY18, considering the weak macro-economic outlook, ICRA said.
"Factors such as corporate earnings, state election outcome, a result of the resolution of NPAs and its impact on the health of the banking sector would be other determinants for FPI flows," the report added.
The domestic institutional investor (DII) segment, a net buyer of equities since FY16, is expected to remain steady over the near-term and would provide support to the domestic capital markets.
While the FPI segment will remain a key market participant, a growing DII segment is a positive development for the domestic capital markets, providing them with much-needed resilience.
"Going forward, a meaningful revival in corporate earnings and abatement of liquidity and capital availability issues would be a key for further fillip to the capital markets and for boosting FPI equity inflows," ICRA's vice president and co-head (financial sector ratings), Samriddhi Chowdhary, said.
She, however, said the near-term outlook for the domestic broking industry is stable.
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