Brokerage Stocks Surge as Retail Trades Jump to Record in India’s Financial Market

A rush of first-time investors into the stock market is burnishing the appeal of brokerages, helping them outperform most peers on a gauge of India’s financial stocks.

Local brokerages, ICICI Securities Ltd. and Geojit Financial Services Ltd., have gained more than 17% this year while the 103-member S&P BSE Finance Index slumped 26%. Discount broker 5Paisa Capital Ltd., which saw its share price almost double in 2020, turned profitable for the first time in the June quarter since it started business about four years back.

“I have been in the market since 1984, but haven’t seen such kind of trading activity by retail investors ever," said C. J. George, chief executive officer at Geojit Financial Services Ltd., a brokerage backed by BNP Paribas SA. “In the past 3 to 4 months, retail volumes in the cash market have almost doubled to a record."

Mirroring the development in the U.S., opening of new accounts at brokerages quickened in India as an extended nationwide lockdown and waning returns from other asset classes prompted mom-and-pop investors to trade. They have also rushed into risky shares such as penny stocks, driving up their huge outperformance against the natinal benchmark, the S&P BSE Sensex index.

Not only has the number of active clients increased, “but the participation is much broader, and we hope that many will remain invested in the market for long-term wealth creation," said Vijay Chandok, chief executive officer of ICICI Securities Ltd.

India’s $1.9 trillion stock market has looked past some bleak economic projections and a steady increase in new coronavirus infections to jump more than 40% from its March low. With gains of almost 10% so far this month, the Sensex is set to be the best-performing equity market in Asia outside China in July, thanks to flows from overseas funds and a growing clout of amateur investors.

“Retail trading is becoming some kind of gaming activity," Geojit Financial’s George said. “Lots of youngsters, instead of playing games, are playing in the stock market." 

(Except for the headline, this story has not been edited by Scrabbl staff and is published from a syndicated feed.)