Brokerage stocks fall by 50% since January

Share price of listed broking firms and financial services companies have suffered around 50 per cent erosion from their 52-week high touched at the beginning of 2008.

Last week’s Budget proposals have been responsible in a major way for the downslide besides the weak global market sentiments.

Following the Budget announcements, brokerages have been at the receiving end on account of the negatives in the Budget such as 50 per cent rise in short-term capital gains tax, introduction of commodity transaction tax (CTT) and the Securities Transaction Tax (STT) being set-off against income-tax will now become a part of the business expenditure.

“The expansion plans of some of the brokerages may suffer after the negative announcements made in the Budget in short run, but in the longer term they won’t be affected like in the past when STT was introduced,” an analyst with a credit rating agency said.

“The other dynamics in play are much stronger compared to the negatives in the Budget proposals and it will be overcome in the course of time,” he added.

Among the recently listed brokerages Motilal Oswal and Edelweiss Capital have suffered the maximum, while Religare Enterprises too has suffered from the weak investors’ sentiment.
Tumbling scenario

Motilal Oswal has fallen from a 52-week high of Rs 2,270 on January 4 to Rs 786, a drop of 65 per cent. During the last one month, Motilal Oswal has fallen by 36 per cent and 18 per cent of it happened over the last one week.

Edelweiss Capital’s share price has slipped from a high of Rs 1,795 to Rs 769.80, again a fall by 57 per cent. Edelweiss too has fallen by 24 per cent over the last one month and by 13 per cent during the last one week.

Religare Enterprises has fared better and fallen by 40.68 per cent to Rs 433 from a high of Rs 730 touched on January 3. During the last one week, the scrip of the Ranbaxy group promoted company has fallen only 6.56 per cent.

During the last one-week, among the major losers figure Indiabulls Financial Services (22.97 per cent), India Infoline (22.90 per cent), Reliance Capital (22.06 per cent).

Indiabulls has lost 51.75 per cent from the 52-week high of Rs 1,028 touched on December 27, 2007; India Infoline’s fall from the recent high of Rs 1,974 on January 1 has been steep too by a hefty 54.35 per cent.

Reliance Capital, which has a broking services and mutual fund business, has fallen by 48.75 per cent from the one-year high of Rs 2,925 touched on January 10.

Other listed broking firms that have taken a major hit post the Budget announcement are JM Financials (20.69 per cent), Geojit Financials (16.22 per cent), Apollo Sindhoori Capital Investments (20.09 per cent), Prime Securities (17.29 per cent) and Arihant Capital Markets (17.19 per cent).

ICICI Bank, Kotak Mahindra Bank and SBI, which offer broking services, too have suffered during the last week, though their fall has also been on account of other factors.