As on every other weekday afternoon since 1968, Mansukhlal Upadhyay sits in the founder’s chair of his humble stock-broking office on Hamam Street in Mumbai’s historical Fort district, a block away from Dalal Street, the hub of share trading and home to the Bombay Stock Exchange (BSE). It is lunchtime, and the 85-year-old, dressed in his signature white kurta, crisp dhoti and Anna-style cap, is sharing some tea and laughter with his usual group of old clients.
The camaraderie around Upadhyay is as it always was, but beyond, in the rest of the office, echoes an eerie silence.Most of the employees are nowhere to be seen, the ‘bolt’ room — where broking operators buy and sell shares for investors — is empty, screensavers float aimlessly across untouched computers and the buzz of phone calls characteristic of a broking firm is absent.
Just two years ago, before the global economic slowdown of 2011 hit India, the MM Upadhyay office was a different place. Phones would ring incessantly in the bolt room, operators juggled more than 200 investor calls a day and, by charging a brokerage rate of 2% from clients, the firm would make a revenue of R 1 lakh or more a day. As the Sensex dipped steadily through 2011 (see box below, ‘Vital signs’) and investors began pulling out of the stock market, Upadhyay suffered the fate of most small retail brokers dealing in the BSE. Most of his clients grew hesitant to invest; the braver ones were eventually beaten back by the losses they began to suffer. Upadhyay was forced to bring down his brokerage rate to 0.5%. Today, with the trickle of client transactions he handles, he barely makes Rs 1,500 a day. Compelled by these circumstances, Upadhyay has made a decision he could never have imagined when he launched his company 44 years ago: in March, he will shut shop for good.
“In my career, I have seen many downturns in the market, including the one after the 1993 bomb blasts. But this one has been the worst for everyone, because it is coupled with inflation,” says Upadhyay, his voice quivering as he talks about having to bow out of the business he has grown up in. In the course of the past year, Upadhyay had closed his branches in Jaipur, Agra and Patna. His employees at the Fort office, where he has incurred heavy losses, are now spending more time outside, looking for other jobs.
On Dalal Street outside, the scene is just as desolate. Touted unanimously as a meltdown worse than the one in 2008, last year’s economic slowdown has changed the aura of Mumbai’s iconic financial district. Inside the BSE building, several broking offices are lying shut; outside, everyone from the biggest financial security firms to restaurant owners and street-dwelling tea vendors are feeling the pinch of the drop in stock market rates. The sea of people that was typically seen walking around the imposing BSE building, tracking share prices on its large outdoor screen, has now thinned down to a narrow stream.
“About a year ago, there was no place to stand or walk on the streets of this area,” says Mansi Kothari, the Fort branch manager of Western Securities, a firm dealing with financial products including stocks, mutual funds and fixed deposits. “But in the past six months, investors have not made money, are not coming to Dalal Street, and the roads are almost empty.”
The drop in footfalls, of course, is also a result of the stock market business going online, which made it easier for retail brokers to set up several local offices all over the city and suburbs. But that’s not the main reason for the emptying out.
“When this restaurant was launched 18 months ago, we were always crowded,” says a 28-year-old waiter of a popular Dalal Street eatery who did not wish to be named. “Ever since the market crashed, footfalls have drastically decreased because more people find it economical to bring tiffins from home.” At this restaurant, says the waiter, less business meant not getting any increments to his salary and consequently having to cut down his household budget heavily.
“Besides, we earlier catered to launch parties of at least three new companies getting listed in the stock exchange every month,” he says. “Today, not a single new company has been listed in the market.”
The area around the stock exchange also houses the offices of hundreds of lawyers and advocates, who, too, have not escaped the impact of the meltdown. “Corporate law firms are not doing well right now, and even new lawyers are not getting jobs. This has directly affected sales in my business,” says Vidyut Shah, who runs a specialised bookstore for law-related books and accessories in the heart of the financial district.
Shareholders on almost every rung of the economic ladder now face budgeting difficulties.
“I have completely stopped investing in stocks in the past ten months because I can no longer afford to,” says Pankaj Bhatt, 58, an advocate who lives in Malad with his wife and daughter. Although Bhatt has not changed his lifestyle so far, he has now had to dip into his savings, which have not increased in a long time.
Larger stock-broking firms, such as KR Choksey Shares and Securities, have also felt the impact. “The falling volumes forced our company to cut costs. We had to go slow on recruitment and even had to remove people from the organisation,” says Deven Choksey, chief executive officer and managing director of the firm.
While some players in the stock business claim it is too soon to hope for a better 2012, most believe that the worst is over. “We faced a serious slowdown in business in the second half of 2010 and in most of 2011, but in the past three months, we have seen some stabilisation,” says Motilal Oswal, chairman and managing director of Motilal Oswal Financial Services. “The markets are now thinking ahead.”
Pleased with the government’s new policy of allowing foreign investors to directly invest in Indian equities, brokers and shareholders now have hope. Some, such as broker Rajesh Bafna, are waiting for the union budget in March to bring good tidings. “The government will have to make some new policies in the budget to stabilise the markets,” says Bafna, who works at a financial services firm that saw an 80% dip last year in the number of clients investing in stocks and mutual funds.
To those like Upadhyay, however, the game is already over. Sitting with old clients who have remained his best friends all through the crisis, he discusses plans of giving his 1,000 sq ft office space on rent. “It is the only way I can convert my losses into some profit.”