The brokerage industry generated a revenue of INR 380 Bn in FY 2023. Will Indian brokerage industry continue on this growth trajectory? Ken Research

ByVijay Kumar

1. New age investors preferring low priced DIY platforms supplemented with free industry level research

Trends and Developments India Financial Brokerage Industry

  • Traditional brokerage charges of 0.3-0.5% have prompted retail investors to shift to Flat
  • fee model; thereby preferring Discounted Brokerage Firms.
  • Exhaustive list of FAQs on website, Quick response time, above 99% SLA is preferred.
  • Withdrawal of Funds: Retail Investors prefer brokerage offering option of anytime.
  • withdrawal of funds. Recently, integrated by many discount brokerages within platforms.
  • Seek feedback of peer investors’ trading platforms to consider opening/switching broker.
  • Cost of Services: Prefer Free/Minimal charges on advisory services, stock reports,
  • additional industry Coverages etc.
  • Quality of Services: Investors tend to compare advisory/reports of different brokerages.
  • and prefer one’s with most accurate& reliable analysis.

2. Fear of Shrinking retail customer base prompting firms to diversify to non-core services

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FSB Retail Clients switching to Discount & Hybrid Brokerages

  • With growing traction from prices offered by discount brokerages, losing out on retail clients & FSBs converting to Hybrid, revenue from Full Service Brokerages has been following a downward trend.
  • In order to attract more customers, major FSBs are indulging in cross selling & focusing on non-core segments including distribution of mutual funds, insurance, loans etc.
  • Decreasing momentum of FPI Investments & IPOs (INR 1,236 Cr (FY’14) to INR 1,5750 Cr (FY’19)) also contributed to downturn for FSBs.
  • With similar brokerage pricing major players competing on research & advisory services, Trading Platforms provided & Third Party add ins.

3. Fostering Client Trust might take toll on Brokerage’s Revenues

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  • Amendment: Brokerages can lend as much as their own capital.
  • Likely Impact on Capital Market Trading Activity: Intraday trading forms a major chunk of capital market trading and amendment could impact the ‘Level of Margins’ being availed by clients.
  • Impact on Brokerage Firms: A welcomed move for overall development of industry in long term yet likely to take toll on brokerage revenues for firms offering higher margins as their USP.
  • New Guideline: Collection of Information of Client Securities from all trades and matching it with securities.
  • Impact on Brokerage Firms: Additional carefulness in reporting fund/securities balance to prevent another Karvy like situation