Will Hybrid Brokerage be the new leading model of India Brokerage Industry?

The Indian trading industry has come a long way in demand & supply infrastructural development coupled with jump in retail participation rate from almost Nil in 2001 to 2-3% in 2019 & expectation to grow to ~7% in next five years with major traction coming from Tier 2 & Tier 3 cities. This, up growth, trend and simultaneous technological advancements adopted by brokerage firms, competitive pricing, increasing FII & increased financial awareness among millennial population compels the incumbent brokerages to reconsider the business model.

What has been the traditional method of broking in India?

Full Service model is the age old brokerage method serving its customers plethora of services via a dedicated relationship manager. With a manager doing everything from trade execution to overall portfolio management, these brokers charge high brokerage ranging from 0.3-0.6% of traded value.  This model is generally preferred by institutional investors for their research, advisory & management services and by retail investors which are new to the capital market trading and prefer outlet based trading.

Even after the incumbency of discount & hybrid brokerage models in India, we still see full service brokerage being preferred by some proportion of investors owing to factors such as credibility, ease of transactions (as most of them are bank based) & portfolio diversification options offered by them.

India Financial Brokerage Industry Cover Page

How are discount brokers offering minimal brokerage charges?

Trade Only Services: Discount Brokerage is modeled on the concept of supplying best of technology, empowering its investors to undertake trading services all by themselves by providing a DIY Platform. Integration of sophisticated technology is considered as one of the investment cost which is recovered by levying per trade charges on number of trades (Lowest of 0.01% or INR 20). Owing to no major cost involved in opening offline trading outlets and hiring analysts, Such a model is preferred by investors (largely retail) looking to trade high volume and value all by themselves with minimal brokerage charges.

Why is there a scope for Hybrid Model?

Emergence of discount brokerage model turned the majority of retail brokerage industry to their side thereby making full service brokers to losing out on huge chunk of new retail clients. In order to compete with discount brokers & cater to dual clientele needs of both retail & institutional clients, traditional brokerages such as Axis Securities and Angel Broking introduced special discount brokerage plans (Trade@20 by Axis Securities and iTrade by Angel Broking) for trading in equity commodity, &derivatives segment; providing both full service offerings and discounted brokerage plans for both type of customers.

Similarly, Discount brokers have been working on the model of wafer thin margins, experiencing high volume trades but with limited offerings to institutional clients. This has prompted certain discount brokers to expand their product portfolios to Portfolio Management Services, Institutional services & third party products distribution of Insurance, Loans, and Mutual Funds etc, to become a one-stop solution for all financial needs.

What trends are expected to drive the future of brokerage Industry in India?

Global Investing is one of the very recent trends introduced to investors in India by companies such as Stockal & Vested Finance. The main vision behind introducing this concept is the investor’s demand for portfolio diversification via multiple geographical investments. However, investing in international equities involves large amount of funds requirement unlike investing in Indian stocks. Therefore in order to solve this problem companies such as Vested finance offers the opportunity of fractional trading (purchasing fractional portion of stock) thereby complementing its global investment platform.

India Financial Brokerage Industry

Diversification on basis of assets class across different geographies with optional of time-based diversification is gaining momentum, commonly undertaken by ETFs, Mutual funds & thematic investment opportunities introduced by companies such as Small case in India. In order to mitigate their risks, Indian investors are expected to follow these trends thereby making them preferred choices for future investments.

Companies Covered:-

Full Service Brokerages

ICICI Securities

HDFC Securities

ShareKhan

Kotak Securities

Motilal Oswal

Nirmal Bang

Geojit Financial Services

IIFL Securities

SMC Global Securities

Reliance Securities

Discount Brokerage

Zerodha

5Paisa

Upstox

SAMCO

Prostocks

R K Global

Wisdom Capital

Interactive Brokers

Hybrid brokerage

Angel Broking

Edelweiss

Axis Direct

Swastika Investmart (TradingBells)

MasterTrust

Key Topics Covered in the Report:-

Overview of India Financial Brokerage Industry

Understanding customer’s requirements

Decision making criteria for selecting brokers by retail & Institutional Clients

Evolution in Role of Brokers, 2005-2022

Full Service Brokerage in India:

Overview with Business Model followed

Competitive Landscape including Cross comparison among major players on financial, operational, Pricing, Strengths & Weakness Analysis

Company Profile of major Full Service Brokers

Future Outlook & Potential of Full Service Brokers in India

Discount Brokerage in India:

Overview with Industry Ecosystem & Business Model followed

Competitive Landscape including Cross comparison among major players on Financial, Operational, Technological, Pricing, Strengths & Weakness Analysis

Company Profile of major Discount Brokers

Technological Landscape including Technologies available, Profiling of major Technology Providers

Overview of Back Office Operations with Profiling of major Back Office Operators

EKYC Providers & costing

Future Outlook of Discount Brokerage

Case Study of Stockal

Hybrid Brokerage in India:

Overveiw with Business Model followed

Industry Landscpae including Cross comparison among major players on financial, operational, Pricing, Strengths & Weakness Analysis

Company Profile of major Hybrid Brokers

Future Outlook for Hybrid Brokerage with expected Industry Trends

Regulatory Landscape Governing Brokerage Industry in India

For More Information on the research report, refer to below link:-

https://www.kenresearch.com/banking-financial-services-and-insurance/financial-services/india-financial-brokerage-industry-outlook/335268-93.html

Related Reports:-

https://www.kenresearch.com/banking-financial-services-and-insurance/financial-services/philippines-financial-brokerage-market-outlook/243555-93.html

https://www.kenresearch.com/banking-financial-services-and-insurance/financial-services/indonesia-financial-brokerage-market-outlook/239909-93.html

Contact Us:-

Ken Research

Ankur Gupta, Head Marketing & Communications

Ankur@kenresearch.com

+91-9015378249

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