France’s biggest bank, BNP Paribas SA, has agreed to buy Indian brokerage Sharekhan for an undisclosed sum as it looks to beef up retail broking operations in India, taking advantage of a surge in retail investments into stocks.
A rally in share markets that sent indexes to record highs in March is attracting hordes of individual investors, improving the outlook for retail brokers after years of weak profits.
Analysts believe there is large potential for growth in the brokerage sector, since fewer than 1.5 per cent of households put money directly into shares, compared with around 10 percent in China and 20 per cent in the United States.
The deal marks BNP’s second big play at retail broking in India. In 2007 the company bought a 34 per cent stake in a domestic brokerage, renamed it BNP Geojit Paribas Financial Services and it now has about 750,000 retail clients.
BNP, whose financial offerings in India include corporate and retail banking, investment banking and wealth management, said the purchase of Sharekhan will allow it to further expand into brokerages as well as asset management in India.
“Sharekhan will serve as a platform for the group’s strategy in India to offer a comprehensive range of products,” Joris Dierckx, country head of BNP Paribas, said in a statement.
Although India had seen a surge in retail interest in stocks in the last decade, a crash after the global financial crisis of 2008 drove individual investors away from equities for years, returning to a traditional preference for property and gold.
Analysts believe that reluctance is now starting to crack.
The Nifty has surged around 42 per cent since the start of 2014, largely over optimism tied to Prime Minister Narendra Modi’s government, elected by an overwhelming mandate last year on promises of economic reform.
Domestic net inflows into equity mutual funds in June were the second-highest ever, second only to January 2008 before the financial crisis took hold, data from the Association of Mutual Funds in India shows.
Mumbai-based Sharekhan began operations in 2000, is one of India`s largest retail brokers and has about 1.2 million clients.
