Winds of change may have started blowing in India’s stock broking industry, with even traditional brokerage firms now cutting costs and offering retail investors low-cost brokerage.
Winds of change may have started blowing in India’s stock broking industry, with even traditional brokerage firms now cutting costs and offering retail investors low-cost brokerage. First it was brokerage firm Sharekhan that launched a separate entity named ‘Espresso’ to venture into discount broking. Later, Kotak Securities Ltd announced its Trade Free Plan last week. The recent influx of new age investors and traders, propelled further by lockdown, prompted a rethink, Kotak Securities managing director & CEO Jaideep Hansraj told Financial Express Online.
Both Sharekhan and Kotak Securities seemed to have taken note of the disruption that new-age stock brokers such as Zerodha, 5paisa and Upstox have caused. Both the traditional brokers have either tweaked their business or started a whole new venture for competitive offerings. The offerings are similar to the US-based stock broking platform called Robinhood. The platform gained popularity during the initial months of this year when a large number of small investors were attracted to Robinhood’s commission free trading platform for stocks, ETFs, and options. Some believe that a flood of young investors using platforms such as Robinhood invested in equity markets that partly helped US markets gain from their lows, despite the economy being in a recession.
The new offerings
While launching its new trade free plan, Kotak Securities said that their customer research revealed the need for a competitive brokerage plan from a well capitalised and reputed stock broker in the Indian capital market. “KSL’s Trade free plan bridges this gap,” the firm said. The plan offers zero brokerage on intraday trades and Rs 20 per order for all other F&O trades. Interestingly, KSL is also offering a refund of fee and brokerage no questions asked if the customer is not satisfied within one month, and it also gives customers the option to give stock instead of cash as margin for trading.
On the other hand, Espresso by Sharekhan has zero brokerage for cash-and-carry order while has a Rs 20 charge for intra-day trade. Espresso charges zero brokerage on square-off orders in case of loss. For F&O, commodity, and currency orders too it charges merely Rs 20 per order.
Time to rethink strategy
“Clearly, the new age investors are well informed, independent and like to make their own investment decisions. Trade free plan is ideal for these investors,” he added. The initial few days have seen an encouraging response for KSL’s new trading plan. “There’s obviously a significant spurt in leads and new accounts being opened. A number of customers are encouraging us by leaving great testimonials on our social media walls. We are making accounts trade ready in 60 minutes and customers are delighted with such ease, convenience and saving of time,” he added.
New-age brokers welcome change
New-age stock broking firm Upstox welcomes the change that the industry is seeing. “We have seen the entry of an increasing number of online brokerages, including traditional firms that have set up their online business and this has only increased the options for a first-time trader and expanded the equity penetration in the country,” Ravi Kumar, Co-Founder & CEO, Upstox, told Financial Express Online. “There is definitely room for more players in a country where there is only 3-4% equity participation out of a population of 1.3 billion,” he added.
Upstox does not believe that the entry of traditional players into the discount broking business poses a challenge for them. “India is a vast market that opens up room for more players. Today’s customer is intelligent and able to recognise a high-quality product that meets his needs,” Ravi Kumar said.
While people are warming up to the idea of investing in equities, the retail participation in India is still very low, said Harsh Jain Co-founder and COO Groww. “We see this as a positive development- more players will democratize investing further, giving investors more convenience and choices,” he added.