Overview:-

• Discount Broker:- A discount broker is a stockbroker who carries out buy and sell orders at reduced commission rates compared to a full-service broker. A discount broker or a full-service broker provides services to trade securities online. 

• When it comes to performing seamless stock trading without encountering the barriers of time and distance, the use of online trading platforms for trading in stocks is quite evident. One can do online trading through 3 basic interfaces i.e., mobile-based, browser-based, and desktop-based.

• The top trading platforms in India (other than Upstox Pro) include Zerodha Kite, FYERS ONE, Sharekhan Trade Tiger, Angel Broking’s Speed Pro, TradeStation, Trade Eye with Upstox Pro, and Zerodha Kite are highly rated by rating agencies and websites, consistently.

Trading Platform:-

• A trading platform is a software system used to trade securities. It allows investors to open, close, and manage market positions online through a financial intermediary like an online broker.
• Online trading platforms are frequently offered by brokers either for free or at a discount in exchange for maintaining a funded account and/or making a specified number of trades per month.
• The best trading platforms offer a mix of robust features and low fees.

Features of the Trading Platform:- 

• Trading platforms are software systems used to execute and manage market positions.
  
• Trading platforms can offer an easy-to-use interface with basic order entry screens for beginning investors.
• They can also offer more sophisticated tools such as real-time streaming quotes, advanced charting tools, live news feeds, educational resources, and access to proprietary research.

Market Size:-

• The industry is likely to clock a total revenue of ~Rs. 27,000-28,000 Cr in FY22, registering a year-on-year (y-o-y) growth of 28.0% to 33.0%.
• The domestic broking industry’s revenue registered ~10.5% CAGR over fiscals 2015-2020, to reach an estimated Rs 225 billion (bn)

Key Drivers:-

• Mobile and internet penetration: - Higher mobile penetration, improved connectivity, and faster and cheaper data speed, supported by Aadhaar and bank account penetration has led India to shift from being a cash-dominated economy to a digital one.
• Expect growth to continue due to systemic under-penetration: - Falling interest rate cycle, coupled with low returns from traditional investment instruments such as gold and real estate, has led to a shift in retail investor interest in the capital markets.

Rise in the number of first-time investors. Month on Month (M-o-M) data of new Demat accounts in 2022 shows the interest of first-time investors towards investing. 

Industry Evolution

• The Indian brokerage industry has been undergoing a structural shift from a Percentage-led business model to a flat brokerage & subscription-based model.
• The market share of the top two discount brokers in terms of the number of clients, namely Zerodha and Upstox, has increased from 17.0% to 30.0% in the past year, which reflects clients’ attraction toward flat brokerage plans.
• Discount brokers like Zerodha, Upstox, 5Paisa, and newly joined: Angel broking and Groww have been major beneficiaries, especially over the past year in terms of incremental client acquisition.
• Early mover advantage in this segment has benefitted discount brokers. Also, digitalization, user-friendly apps, and interface, service-oriented nature of business have attracted more clients especially New to Market customers. This has led many traditional brokerages like Sharekhan, Kotak Sec, etc. to come up with their own discount plans.
• Indian broking industry though has a transaction fee model but it’s structurally moving for a clear distinction between charges for transactions and a fee-based model for services like wealth management and investment advisory. While a shift toward a fee-based model was already in the works with brokers focusing on building an advisory model (wealth AUM), the pandemic has added a boost to the pace of change. Apart from advisory services, focus on fund-based activities, including margin funding and loan against shares, is on the rise, enabling brokers to build sustainable earnings.

Impact of Covid-19

• The covid-19 outbreak was declared a global pandemic by World Health Organization (WHO) on 11th March 2020. Indian authorities had followed an approach of complete lockdown since 24 March 2020 starting with a three-week complete lockdown, during which only defined essential services were operating with limited capacity.
• Stockbroking service was declared as an essential service.
• Considering that Industry’s operations are primarily technology based / Online, the Industry has been in operation consistently with minimal staff in the office and others working remotely. 
• As of 31st March 2021, based on the financials available, the COVID-19 outbreak has not adversely affected the business operations and rather accelerated the growth by onboarding first-time investors.

Key Trends:-

• Historically, Indians have invested their surplus in physical assets, real estate, and FDs, refraining from investing in capital markets, reflected in Demat accounts as a percentage of PAN card holders at just 13.0%.
• Another key factor driving the growth of the discount brokerage industry is India’s demographic profile; India has the largest working-age population with millennials (those born between 1980 and 1996) accounting for 36.0% of the population and projected to be 50.0% of its workforce by 2025. 
• Rising financial savings and digitalization remain long-term growth levers: - The gradual pickup in economic growth, benign inflation, and low-interest rates are expected to increase household financial savings in India. India’s young population is typically more technology-savvy and, with increasing use of wireless broadband internet, internet and mobile trading should get a boost. 
  

Competitive Landscape:-

Market Share Players in terms of active client base