New Delhi (PTI): Domestic brokerage firms are likely to see challenging days ahead with bearish market sentiments and tightening macroeconomic situation keeping investors away, a latest report says.

"Declining market turnover due to dwindling retail and institutional investor participation, significant correction in stock prices, dismal investment banking outlook and a worsening macroeconomic scenario do not bode well for brokerage firms," as per a report by German banking major Deutsche Bank.

Further, the fragmented nature of the brokerage industry, coupled with increasing competition from large players in the retail and institutional broking side is likely to exert pressure on the ability of broking houses to maintain market share, margins and consequently return ratios, it added.

The bank maintains negative outlook for two of the leading brokerages in the country India Infoline and Edelweiss Capital.

"A substantial portion of revenues for both the brokerages comes from capital market related activities. We believe declining volumes, coupled with high operating leverage embedded in their business, is likely to exert severe pressure on earnings in the near term," the report stated.

It added that despite growth in newer financial products there seems little increase in profitability of brokerages in the long run.