In their efforts to grow volumes of trade, most of the Mumbai-based leading broking houses are looking beyond the commercial capital.
Although many of them had their partners in some other cities earlier, they have now opened their own branches in several cities and took the franchisee route to accelerate the pace of expanding their reach.
Although some of the securities firms have been growing by over 100 per cent every year during the last two years by expanding their operations to smaller cities and towns, the booming market has failed to attract the retail investors in a big way, according to some brokers.
"Expansion of the investor base is happening, mostly due to expansion of our reach. However, this expansion of the base does not mean that our penetration into the retail base is very great," says Deena Mehta, managing director, Asit C Mehta Investment Intermediates.
"Though there seems to be growth in the numbers of all the brokers, actually switching of clients is also taking place," Mehta said, without giving any specific figures.
S A Narayan, managing director and head - retail, Kotak Securities, said it was very difficult to quantify shifting of loyalties by clients. "Even after they (clients) shift their transactions to another broking firm, they will not close their accounts immediately, just like how they would do with their bank accounts."
Accounts of such clients may remain dormant for some time. "Even an investor investing for a longer timeframe may not do transactions so frequently, how could we distinguish them," he said.
The other major hindrance to growth of the retail investor base is lack of banking facilities in several towns for quick transfer of money," Mehta said. Asit Investment Intermediates has outlets in over 200 locations across the country, and the expansion will go on whether the market is in a bull phase or not, Mehta said. Pradeep Gupta, managing director, Anand Rathi Securities Ltd, also blames lack of efficient banking for slow progress in the firm's expansion.
"Banking efficiency and connectivity to the town is one of the important factors while deciding on a location for a branch or a franchisee. We are reluctant to enter any location that does not have efficient banking systems."
"Banking connectivity is not good in many places, except for major cities. Three days for clearing local cheques in this era is simply ridiculous. We are taking five days now to get and remit funds from and to our customers. This necessitates brokers to channel more funds so as to expand business," Gupta said.
A number of broking firms are now organising seminars to educate their prospective customers.
"There is no meaning in fighting among ourselves. Brokers must enlarge their cake as the country is vast and holds potential to bring in a lot of new clients, by educating them on investment techniques," Mehta said. At present, only a few hundred broking firms are catering to about 2 per cent of our total population. So, there is a lot of scope to bring in more clients under each firm's fold, she said.
Mehta said investors have to take care of regulatory complications in order to enter into investment practices. "There are three agreements that an investor has to enter into with brokers and others before starting to deal in equities. Indians traditionally deal based on trust and shy away from stringent formalities," she said.
