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  1. ‘Discount broking likely to expand up to 35 per cent in 2-3 years’

‘Discount broking likely to expand up to 35 per cent in 2-3 years’

Discount brokers have grown very rapidly in the past three years due to their edge over full service brokers in terms of trading costs.

By: | New Delhi | Published: July 5, 2016 12:05 PM
Sensex, Nifty, BSE, NSE, discount broking Discount brokers have grown very rapidly in the past three years due to their edge over full service brokers in terms of trading costs. (Reuters)

discount broking, stock markets, bse sensex, nse niftyConcept of discount broking is not very old in India, Nirdosh Gaur, managing director and chief executive officer, Moneypalm told Feonline. He further added that with increased computer and internet literacy, discount brokerage is slowly gaining acceptance and is currently more popular among people who have access to internet. In Europe and US, it is a fairly known and much more accepted concept.

Q. How discount brokerage firms are different from ordinary brokerage houses?
A. The biggest point of difference between an ordinary broker and a discount broker is the brokerage charged from the client. If a client purchases a single lot of Nifty, he pays a brokerage of anywhere between Rs 50 – Rs 300 to his broker. On the other hand he pays only around Rs 15 to his discount broker, even if he trades 100 lots in a single order. Now this difference goes straight in the pocket of the clients.

Other difference is, regular brokers usually have many offices to tap clients but since discount brokers operate online, they normally have only one or very few offices.

A full service broker provides a relationship manager to the client, whereas a discount broker sets up a dedicated customer support team to help the clients.

Stress of an ordinary broker is to give trading tips to clients, whereas stress of a discount broker is to provide information and impart knowledge to the client so the client is empowered to make financial decisions himself.

Q. What are the advantages and disadvantages of discount brokerage firms?
A. Advantages of a Discount Brokerage firms:
1. Highly discounted brokerage charges, which can help a person achieve breakeven much faster.
2. Since it’s a completely online platform, the technology used is mostly superior.
3. No relationship manager means investment decisions of a person are not influenced by anyone. Helps a person take a wiser and saner investment decision.

Disadvantages of a discount brokerage firms:
1. Since discount brokerage houses work on bare minimum profits, most discount brokerage houses do not give leverage on delivery trades.
2. Discount brokerages mostly have either one or very few offices as they provide online services. This can be a problem for walk-in jobbers who come to broker’s office to trade.
3. Discount brokers do not offer tips to clients.

Q) How old is the concept of discount brokerage firms in India and overseas?
A. In India the concept is not very old, around 6 years or so. With increased computer and internet literacy, discount brokerage is slowly gaining acceptance and is currently more popular among people who have access to internet. In Europe and US, it is a fairly known and much more accepted concept.

Q. How the trend of discount brokerage firms are growing in India?
A. Discount brokers have grown very rapidly in the past three years due to their edge over full service brokers in terms of trading costs. Discount brokers are increasing their market share every year and as per a rough estimate they are growing at the rate of 70 per cent since last 3 years. Though the official figures are not known, but roughly the current market share of discount brokers is in between 8-10 per cent and is expected to expand up to 30-35 per cent in coming 2-3 years.

Q. Can you give us a fair idea about Moneypalm and its operation?
A. Moneypalm was setup in 2012 with a vision to completely change the rules of brokerage industry by providing a platform which is more customers centric and highly economical. Moneypalm is a member with NSE, BSE, MCX and CDSL.

Moneypalm is a full service discount broker and offers an unprecedented brokerage of a maximum of rupees 15 per executed order. Even if your trade value is worth crores for a particular order, Moneypalm will not charge you more than Rs. 15 for that order.

Moneypalm is different from other discount brokers as it offers services of a full service broker like high intraday leverage and also leverage on delivery. Also Moneypalm offers ultrafast trading terminal NOW and personalised customer support to its clients.

Moneypalm has come up with an unbelievable and once in a life time offer. Under this offer, if a person opens his account before July 31, 2016, Moneypalm will offer him one month of brokerage free trading from the date of account opening. This means, a person can trade as much as he wants for one month and Moneypalm will not charge any brokerage from him. But he will have to pay any applicable government taxes like STT, Stamp Duty etc.

Q. As a discount broking firm, how do you see domestic equity markets after the implementation of 7th Pay Commission?
A. Implementation of Seventh Pay Commission recommendations will have a positive impact on Indian equity markets and also have a positive impact on consumption growth for the next 3-4 years. We are expecting that the urban demand will spur after implementation of Pay Commission recommendations and this will increase demand for discretionary products.

Q. Which stock and sectors are likely to benefit after the government approval on the Pay Commission?
A. Our favorite sectors to watch are automobile, FMCG, retail and real estate. Stocks which are likely to benefit are Hero Motocop, Kansai Nerolac, Maruti, M&M, Titan, PC Jewellers, DLF, Sobha Developers, Godrej Properties, Shoppers Stop and Trent.

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