Stockbrokers’ margins to shrink by 400 bps in FY25 as regulatory curbs hit trading volumes: CareEdge
The regulatory clampdown, aimed at curbing excessive retail participation in derivatives, has led to sweeping changes, including higher Securities Transaction Tax (STT) rates, increased Market Infrastructure Institutions (MII) charges, and modifications in futures and options (F&O) trading rules. These measures have already triggered a sharp decline in F&O turnover, which fell from Rs 11,410 trillion in October 2024 to Rs 6,044 trillion by December 2024.
The recent regulatory changes have directly impacted brokers’ revenue streams and profitability, CareEdge Ratings said in its latest report. “While F&O volumes have dropped, cash segment volumes have remained relatively stable, with some recovery observed in December 2024.” The ratings firm said it expects cash market volumes to stabilize at Rs 21-22 trillion per month in the near term.
The impact of regulatory changes is evident in financial projections for stockbrokers. Industry-wide revenues, which stood at Rs 23,500 crore in the first half of FY25, are expected to dip to Rs 20,500 crore in the second half. While net profit margins are set to fall to 32% from 36% in FY24, absolute profits are expected to remain largely stable as brokers look for ways to mitigate the downturn, the ratings firm noted.
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