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Market sources said other brokerages are also looking to streamline their business models as market volatility, along with increasing competition, has taken a toll on earning yields.
Sharekhan, which is one of the top five brokerages in India, is going through a restructuring process that could impact 350 employees.
A spokesperson for BNP Paribas India said: “Our business is evolving to meet the more complex needs of clients, including through the provision of value-added advisory services, for which we have been hiring.”
“In line with our clients’ expectations, we have moved to provide more digital services.
"Through this digitalisation and restructuring, which will continue in a phased manner over the next few months, around 350 colleagues are impacted,” he added.
Market sources said other brokerages are also looking to streamline their business models as market volatility, along with increasing competition, has taken a toll on earning yields.
Experts say the brokerage industry is getting more competitive due to the entry of discount brokers that offer broking services at fixed fees.
Analysts add that traditional brokerages will have to revisit their strategies amid heightened competition.
Volumes in equity markets - where brokerage yields tend to be higher - have grown at a slower pace, unlike the derivatives markets.
According to Motilal Oswal Financial Services, the average daily traded volumes in the cash market saw 7 per cent growth year-on-year in FY19.
The growth in cash markets has been hit by a decrease in delivery volumes, which saw de-growth of 8.2 per cent to Rs 8,854 crore.
In the previous fiscal year, the segment had seen 26 per cent growth.
The cash delivery segment is the highest-yielding product for brokerages.
“Weak market conditions have deterred retail participation in equity markets.
"Retail investors typically tend to take deliveries and hold on to their positions, which leads to higher yields,” said a sub-broker.
“However, during volatile periods, retail investors prefer to stay away and market volumes shift towards derivative instruments that offer trading opportunities and hedge against this volatility,” he added.
On the derivatives side, the futures segment saw growth of 9.7 per cent to Rs 87,564 crore in FY19, while volumes in options rose 54 per cent to Rs 8.70 trillion.
However, BNP Paribas has re-iterated its commitment to the Indian markets.
“We continue to look for opportunities to grow our services to clients, and remain firmly committed to expanding Sharekhan’s reach in India,” said a spokesperson for BNP Paribas India.
India Vix, considered the fear gauge for markets, has moved up from 14.75 to 16.34-levels, in the last three months - an increase of 11 per cent.
Illustration: Courtesy, Sharekhan
