SEBI's New Mandate on Broker Discounts: Analysis and Market Response | Buy Now Sell Now Lens

Share the broking stocks are taking a hit on the back of that Sebi circular barring volume LED discounts to the brokers and ask the market infrastructure institutions to live in uniform charges. But what does it mean for all these broking counters? Let's Steve dive into this on to the buy now, sell now lens and to make us understand all of these details. What are the implications? Sharad is here live with us. Sharad, tell us what this circle is all about and what's the impact? Well, yes, this circular which had come in the evening got our heads scratching, especially on the brokerage front. A lot of negative new store was expected to come and we saw in the stock prices also. So basically this is for the discount brokers itself. They had certain mechanisms in the entire segment. Now that mechanism is coming down. Now just put it in the perspective, what was the semicircle? Let me just point that out first. The Sebi has asked the market infra institutions to charge all the members uniformly. Now there won't be any slab rates which was there earlier on the larger volumes. Because of that, there was a price differential and that itself has come down. That is what Sebi has been working on South. This charge in the structure would be uniform and they have told that the existing charging system that will be taken off and this will be applicable from October 1st itself. Now the broker fees Sebi has stated should not be linked to the volumes. Of course, the FNO trading also might be impacted if the discount players do not raise their prices. Now overall, if you look at the 0 broking model itself, 3-4 impactful news flows are there. NSE has asked to stop the revenue sharing practices which were there with the brokers itself and this would directly impact the broking revenues. Of course, more disruption would coming and impact analysis. It would be positive for the market infra institutions like BSE and CDSL in the listed space while negative for the stock brokers and also even for banks in a small manner because they also act as depository represents. As per CBM panel meant the discount brokers in the listed space we have Angel One. Also larger players such as Zeroda, Grow and Upstock. This is a negative news law for them and by definition if I speak about discount broker, it means that they offer only trading facilities and no research and advisory services. Alright. So that's basically what discount brokers are who would be likely impacted and like you said Angel one also comes into in that pact, right. So what exactly is happening with Angel Burn? What bigger, how big an impact would this be for the company because that's one of the top losers in that particular space. 8% down, take one point in time was down about 10% or so. So basically they are in the top three discount brokers in the entire segment. So the entire burn with the pain which we are getting that is coming in the Angel broking and of course Investec has come out with its report. They have maintained a buy with the target price of ₹3850 per share. And I have stated that this uniform charges by MI, the impact in the earnings can range between 25 to 30%. That's a sizable amount which they are estimating and of course the entire volume based discounts MI is the way they have earned it because of this differential in FY24 that ranges between 400 to four ₹50,00,00,000. Now in a base case analysis itself, they are expecting that if Angel or increases the per broker charges is basically at rupees ₹20 per order, then it should be able to reduce the impact of the circular. But they are believing that the impact of this order would be much more for the discount brokers whose overall profitability is already low. So I would suggest like most of the analysts are stating that most fintech startups and the larger players who are much more into discount broking, they'll be impacted more and even more than Angel one as well, right. But any, any sort of indication of what would it mean for customers by any chance? Sharad like the well, technically if I have to trade, I was buying a trade at suppose ₹10 or ₹5 an order. Now it might go up to ₹20 have to do with the quality broker. So of course, we might see a lot of fintechs getting closed also because they might not be viable enough because the funding issues are also there in fintech. And interestingly, the larger players might consolidate. But Street is expecting that the brokerage per orders will be getting hiked. OK, that will be getting hiked. And hopefully we will try and understand what it actually means. In fact we spoke to Devin Choksi as well this morning to try and exactly understand what this directive meant to understand the workings of how the brokerage community community also works and why will may be impacted. Let's listen in to what exactly yet to say review that I think is very natural for them to I think announce this particular move because otherwise what we are probably encouraging is I think significantly large amount of volume and that is what I think one can call it as a speculative activity in the marketplace. One of the reasons for which I think the activities have on rampant rise, I think from the derivative point of view, it's also because of the fact that I think you are incentivizing the players to give you more customers for trading. Now should you stop this particular incentivization process then in such situation, definitely I think the brokers will be forced to charge the customers which up till now I think some of the discount brokers haven't been charging. To my mind, I think it's fundamental when you provide any service, if you give it free of cost for longer period of time, that means that we are encouraging the wrong practices. You definitely need to charge one and everybody because every service just cost money. So from that perspective, I think if the move is going to aim at increasing the charges of open charging to a customer that will probably keep in check some part of the security activity. All right, so that's all the news about what is the semicircular all about and what is the impact that we we are seeing actually on all these broking counters. But let's move on and let's connect with our experts then and understand that technically as well as fundamentally how these broking counters are placed right now. And with this, let me welcome Himain Kapadia on the technical side as well as Rajesh Agarwal is joining us to guide fundamentally. A very good morning to both of you. And Himain, let me come to you to have your take on couple of broking counters there, Angel one is definitely having a sharp knock there is down about 8% right now. So what's the, how is the technical setup looking like right now because the chart looks a little distorted, but do you believe that it should be able to like find some support right there? And other than that, fivepesa.com and some of the other broking counters are also seeing some hit. So your take on the technical track, a very good morning to you, Christy. Thank you for hanging on the show. It's always a pleasure actually. OK, the circle just came in yesterday, but Angel One has peaked in the second week of January at around 3896. And this is the 7th, 7th month, month in a row 50 that Angel One has been making lower top, lower bottom. So frankly speaking, it has been corrected for six months and more. So currently I'd say it's, I'm not saying it's discounted, but I believe this will digest this event. We posted a panic low off for 2129.70 on 4th June. Like the rest of the market now that level has held today we've seen a negative gap, which is obviously not a good sign, but the volumes are huge. Normally these panic bottoms are created with such huge volume. Now today those 231216. So for the next three or four training sessions, if this level holds, I think it will, then it would mean that is digested this event and it would stabilize and recover. Yes, till this gap, this negative gap on the chart doesn't get covered, the overhang will remain. But I believe the worst is in the price. Especially worst is in the price when you talk about Angel One is what actually Hemeen has to say. Very good morning to you, Hemeen, as well as good morning to you, Rajesh. Rajesh, we tried to understand exactly what's of an impact would it have on Angel One. You have Investech which has come out with a note on it as well as you're trying to understand as a customer, as a investor, what would be the impact for for the investors as well. What's your take coming in for this particular move? Coming in from Semi where they have asked market institutions like stock exchanges to levy uniform charges on brokers that are not volume based, we've seen almost all of them take a hit even though it was not directly impacting the segment. Isn't it? Good morning, Sherry. Good morning, Sir. Good morning, Ahmed. Yes, yesterday's circular which came by Sebi Water Surprise. I would say for the broking community as a whole, especially the larger ones, the discount brokerage ones, I would say what they used to do was they were collecting charges from the clients on a higher slab. And since they had to deposit the entire money on the month and depending on their individual volume, the individual broker total volume that would be on the lowest left. And this was playing a distorted game for smaller brokers which were not able to garner that kind of volume. So that one, they would be on the same platform. 2nd, a lot of people have started trading speculating I would say in a final and all during COVID and after COVID periods and things have gone out of hand. And this is one of the steps which CB has taken to control this. I think this is a very good step, although it would affect the Brooklyn houses. But as far as investors and traders at largest being concerned, I think it's a very good step in somewhat controlling the trading volumes which the retail traders are dabbing into because of low brokerage, negligible brokerage or somewhere 0 brokerage also. So this is going to go down. And as far as brokerages are concerned, I think there will be a hit up around 25 to 30% on their revenue. So that would be a impact on them. But in the long term, if I talk of long term, two years, three years down the line, it would be a positive effect on all of them because any services which you are providing to anybody I would say would have some charges associated to that. Any brokers are having charges of operating expenses of salaries, electricity bill and other things and if they are providing free of cost service that is somewhat a problem area and going in a long run. So in the long run, I think that would be beneficial to all of them. At this point of time. I think all the brokerage stops which have taken a hit at this point of time maybe of Angel One or the ICC securities or some other main Boo some more from these levels to maybe 510% more cut would be there. So at this point of time, I would say avoided these stocks, alright, avoid these stocks in the near term is what Rajesh has to say. Maybe there may be additional impact on it, but in the longer run, what Rajesh is of the view that it is a beneficial move coming in. It's a good move. It's a healthy move as well as hopefully will benefit even investors as in the customers using those platforms. But on that note, we slip into a break on this. If you like this video then like, share and subscribe to ET Now.