Small Brokers Will Struggle to Sustain Themselves

Rising compliance costs and the need for higher investments in technology are pushing up operational expenses for the broking industry, says R Venkataraman, managing director at IIFL Capital. In an email interview with Puneet Wadhwa, he explains that brokers will also need to add more revenue streams (wealth management, distribution, etc.) to counter the pressure in the broking segment. Edited excerpts:

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Have the 2024-25 January-March quarter earnings lifted market confidence?

IIFL Nifty earnings estimates were downgraded between March 31 and May 12 by 4.8 per cent for 2025-26 (FY26) and 3.5 per cent for 2026-27. The cuts were driven by fears of earnings disappointments, and actual results did little to allay those concerns. Beneficiaries of soft crude, such as cement, saw marginal upgrades, but most other sectors saw downgrades, especially banking, due to rising credit costs, slowing deposit growth, and expected interest rate cuts.

Will 2025 be a year for developed markets (DMs) rather than emerging markets (EMs)?

This is hard to predict — if conditions are right, and they are indeed improving, all countries will prosper. However, the chances of EMs outperforming DMs seem higher, as a weaker US dollar and soft commodities create an ideal environment for EM central banks to lower rates. Globally, faith in the US dollar is waning, which supports a weaker dollar. The dollar index has dropped about 7 per cent year-to-date in 2025.

How is India likely to perform within EMs?