Explained: Why shares of brokerage firm Angel One are up 7% today.

Shares of brokerage firm Angel One rose 7% in early trade on Thursday to hit a high of Rs 2,794.25. While this rise has caught the attention of investors, it is still far from the 52-week high of Rs 3,900.35 recorded in January this year.

The jump in Angel One’s share price follows the recent announcement by Sebi (Securities and Exchange Board of India) that introduced new measures to regulate derivatives trading.

The derivatives segment is a key revenue driver for brokerage firms like Angel One, as it generates a significant portion of their profits due to the high trading volume in this area.

New Sebi regulations

Sebi’s new regulations aim to curb excessive speculative trading in the derivatives market. While these changes are expected to slow trading volumes in the derivatives segment, they are having a positive impact on Angel One’s share price as investors appear optimistic about the company’s ability to adapt to the changing regulatory environment.

Angel One’s performance on the stock exchange is closely linked to its success on the derivatives market. Sebi’s new rules make it unclear how volumes will be affected in the long run.

However, despite the potential impact on short-term trading activity, Angel One shares rallied, reflecting investor confidence in the company’s long-term growth prospects.

Changes in brokerage fees

The 7% increase in Angel One’s share price also comes after the company changed its brokerage fees for cash and capital delivery transactions. From October 1, Angel One has introduced a new flat brokerage fee of Rs 20 or 0.1% per executed order (whichever is lower) for cash delivery transactions plus GST. This move is expected to boost the company’s revenues, although it may impact trading volumes.

Previously, Angel One was known for offering some of the lowest brokerage rates in the industry. The company’s decision to revise these fees comes in the wake of the fact that from October 1, both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) have also increased their transaction fees. Stock exchanges have moved to a simpler fee structure, replacing the previous slab structure, prompting brokerage firms to follow suit.

Outlook for Angel One Ltd

Market experts like those at Motilal Oswal Financial Services Limited (MOFSL) believe that Angel One is strategically positioned to manage any potential impact of the new SEBI regulations. According to MOFSL, while changes in the derivatives market may result in lower trading volumes for Angel One, the exact impact is still unclear.

One concern is how customers will respond to the new regulatory environment. In the past, regulatory changes have not significantly changed customer behavior in terms of allocating money to transactions. The real test for Angel One will be whether it can maintain or grow its market share while dealing with a potential hit to margins.

MOFSL also noted that Angel One is likely to closely monitor the activities of its competitors before making any major decisions regarding pricing or customer acquisition strategies. A company can choose between keeping brokerage fees low to attract more customers or increasing fees to protect its margins.

While there are concerns about the short-term impact of this transaction on Angel One’s trading volume, the company has taken steps to protect its profitability. In addition to changing brokerage fees, Angel One is focused on expanding other areas of its business, including financial product distribution, wealth management and asset management (AMC) services. These areas are expected to contribute more to the company’s revenues over the next few years.

MOFSL remains optimistic about Angel One’s prospects, stating that the company is in a “transformation phase.”

They anticipate that the company’s profits may come under temporary pressure as new regulations come into force, but believe that Angel One will ultimately emerge stronger as it expands into new areas of business.

(Disclaimer: The views, opinions, recommendations and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of India Today Group. You are advised to consult a qualified broker or financial advisor before making any actual investment or trading choices.)