While the benchmark Sensex recorded 38 per cent gains during 2007, shares of most brokerage houses more than doubled (Geojit Financial increased by 130.68 per cent, while Almondz Global Securities rose 113 per cent) this year.

But the price rise of Geojit Financial and Almondz pales in comparison to the returns given by their peers.

Consider this: Prime Securities [Get Quote] shot up 420 per cent (from Rs 58 to Rs 302.30), India Infoline [Get Quote] gained 384 per cent (from Rs 319.30 to Rs 1,547), Emkay Share and Stock Brokers spurted 258 per cent (Rs 79.35 to Rs 281.45) and IL&FS Investsmart gave a return of 195 per cent in 2007.

Experts attribute the main reason for the run-up in the share prices to the untapped retail investor base in the stock markets, coupled with their diversified revenue streams, such as an expected robust earnings through the sale of mutual funds, insurance products and automobile finance.

Stocks comprise just 3-4 per cent of household savings in India and hence there is a big room for brokerage houses to corner a share of the untapped potential, say experts.

Reliance [Get Quote] Money chief executive officer Sudip Bandyopadhay said, "There has been an unprecedented upswing in the broking industry. With the economy growing 9.5 per cent year-on year, this bullishness will continue. The financial services space is an uncharted territory and there is a scope for significant penetration, which is driving the volumes for broking houses."

The financial services segment in India is witnessing a turnaround and is expected to grow at a rate of 12 per cent. According to estimates, broking firms are quoting at a price-to-earnings (PE) multiple of 45-50 times for FY08.

What is noteworthy here is that broking firms that have a foreign participation have climbed much faster. India Infoline had a spectacular rise, after four CLSA executives joined the firm to establish an institutional desk.

This year also saw some high-profile secondary market debut by brokerage houses such as Religare Enterprises, Motilal Oswal and Edelweiss. The IPO of all these companies got huge subscriptions and were listed at a premium to their issue price.

While Motilal Oswal was listed at a premium of 21 per cent, the other two debuted at 75 per cent premium each.

The huge investor response has prompted other broking firms such as Angel Broking, Anagram Stock Broking and ShareKhan, among others, to look for a stock market listing in 2008. Motilal Oswal Financial's shares have surged 67.86 per cent since its listing.

The Indian retail broking segment is much more open to foreign participation than ever, which is reflected by recent stakes in some local brokerages.

France's BNP Paribas bought Geojit Financial Services [Get Quote], StanChart took a 49 per cent stake in the unlisted UTI Securities and Citigroup Venture Capital bought retail brokerages Sharekhan and AnandRathi. More recently, Lehman Brothers acquired the institutional business of Brics Securities.