Instl biz attracts global brokerages, local firms on toes

Look out for Indiainfoline, Prime Securities and Emkay.

 

There is a war brewing on the Dalal Street. The entry of foreign firms in the institutional broking business may put domestic brokers on the backfoot, reports CNBC-TV 18.

It is a business that is too important to ignore or resist any longer. Rs 200 crore every day is the giant institutional broking market for you and what with unprecedented foreign and domestic mutual funds flow.

The lure of this lucre is undeniable. And that is why after exiting his institutional broking joint venture with Morgan Stanley, Nimesh Kampani told CNBC TV18 he was willing to rent an institutional broker until he rebuilt his business.

Nimesh Kampani, Chairman, JM Financial, said "If you can not build it you can always rent it. If I have a corporate client, I can say I do not wanna lose you. I want to work with you and will rent someone in the time being. I could rent Morgan Stanley, CLSA, UBS, Credit Suisse; I could say this deal work with me."

Not just rent, a few months later Kampani was also looking to acquire. Rumour mills pointed at a deal with institutional broking house - SSKI. Nothing has happened yet but SSKI is surely up for sale. And, it should attract bees like honey. After all leading global players like Goldman Sachs, Credit Suisse , Lehman Brothers and BNP Paribas are taking quick steps to launch their institutional business in India.

Frederic Amoudru, Chief Executive and Country Manager, BNP Paribas, says "Clearly, we want to have a strong focus on institutional business. In East Asia we have good franchise and we are big. We want to replicate that in India using our strong connection and deep penetration with FII clients across the region."

As more foreign institutions leverage that 'connection' they could to eat into the business of many domestic brokers who focus on trading shares for the institutional clients.

A precursor to consolidation some would say, but yet others believe that with the pie getting bigger everyone can join the party.

V Gopinath, MD, SBICAP Securities, says "It is a function of the Sensex. But I would say a 30%-35% growth can be taken for granted."

But there is no denying that smaller Indian brokerages could lose foreign clients to the new foreign brokers in town. All this competition is also telling on margins. That is why many domestic brokers are fast adding more products and services like realty advisory and cross border transacting to their portfolio. After all how long can you depend on the Dalal Street.