While the markets may be rejoicing the recent rally, it's hardly a time to rejoice for market mediators or in common parlance, brokers. Broking firms are in such a bad shape that several of them have started winding up their businesses. The number of brokers and sub brokers registered with the Sebi has gone down over the years despite market coming back to the high levels last witnessed in 2007-08. About 500 brokers have shut shop in the current financial year. In the last one month alone, two major retail brokers, HSBC Investdirect and IIFL, wound up their broking business which points towards the dire situation of the broking firms.
Broking firms have witnessed year-on-year fall in their business profitability, as is clear from the financials of the few listed companies (See table). The rising market has brought no respite and the major reason is retail investors shying away from the market. As per a report in The Economic Times, retail participants in the overall market have declined sharply to a 10-year low of 34 per cent in 2013, as compared to 84 per cent in 2003. The retail investor has borne the most brunt of past years' volatility in the market and hence the mass exodus. Also, the overall trading turnover on both Bombay Stock Exchange and National Stock Exchange has dried up in the cash market segment. This implies that the growing activity in the institutional investors' segment has not been able to compensate for the fall in the number of retail investors.
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