After moderating from record highs, the securities broking industry is poised for a gradual rebound, supported by rising MTF exposures and stabilising trading volumes amid improving investor sentiment, though profitability is expected to remain below the record levels of FY2025. Supported by buoyant trading activity in H1 FY2025, ICRA’s sample set of 41 brokers reported ~20% year-on-year (YoY) growth in NOI in FY2025, resulting in strong profitability with net profit from core operations/NOI of 36% (past 5-year average: 34%). However, the decline in trading activity from record levels amid domestic and global headwinds, coupled with the full impact of regulatory measures (phased implementation starting November 2024) in the current fiscal, is estimated to have caused a 6% revenue reduction and an almost 500-basis point (bps) contraction in profitability margins during H1 FY2026. Nonetheless, with the stabilisation of volumes, early signs of recovery in investor sentiment and rising revenue contribution from MTF, aided by scale-up in exposures and the easing cost of funds, ICRA expects the industry-wide NOI to grow about 10% in FY2027 with a resultant margin expansion of up to 200 bps from the current level. The performance will, nevertheless, remain sensitive to global and domestic factors besides regulatory uncertainties.

Exhibit: Movement of key indices and trailing P/E

Source: ICRA Research, NSE, Yahoo Finance