Active accounts: discount brokers gain market share

The number of people actively trading through their demat accounts went up nearly 10 per cent last calendar year, according to data published on the NSE website. However, the biggest beneficiaries of this increase seem to be discount brokers, whose client base of active traders has gone up sharply.

Data published on the NSE website shows that total active clients for all stock brokermembers of the exchange stood at 56.75 lakh on November 30, 2015. It stood at 51.69 lakh a year ago. This count is of investors who have traded through their demat accounts in the intervening period, and does not include accounts that haven’t seen any activity. These dormant accounts, with no trades taking place in them, doesn’t bring much by way of revenue to brokers.

The largest brokers – by sheer number – are still those attached to banks who benefit from their access to salary accounts, the data show. ICICI Securities, with 5.88 lakh active clients, reigns supreme, gaining 5.08 of the incremental number of active clients in the 12-month period. This is followed by HDFC Securities (4.68 lakh), Axis Securities (2.3 lakh) and SBICAP Securities (1.51 lakh).

Reflects whole of market

The NSE’s figures for active traders is largely representative of the entire stock market because it is the largest bourse by market share. According to the NSE’s offer document for its proposed public offer, in FY16, the stock exchange held 85 per cent share of the total industry-wide turnover in the equity cash segment and 94 per cent of trading in equity derivatives.

IIFL (formerly India Infoline) saw the largest percentage reduction in the number of active traders, down 12.63 per cent to 2.29 lakh. Edelweiss Broking lost 9.44 per cent of its active clientele, ending 2015 with just over 70,000 active accounts.

Brokers, who have seen their active client base fall, insist that one shouldn’t read much into these numbers. In an emailed response, IIFL said, “Since the last two years, as part of strategy, we are discouraging small and marginal customers from direct equities and suggesting to them to invest through the mutual funds route for mitigation of risk in a volatile environment.”

Stellar show

Others have said that even if a client doesn’t trade on his/her demat account, there are other revenue streams that come with active client relationships, including distribution of other financial products.

Discount brokers are making rapid strides, meanwhile. Zerodha, the largest discount broker in the country, saw the number of its active clients rise nearly 93 per cent to 1.19 lakh as of November. In an earlier conversation with BusinessLine, Nithin Kamath, Founder & CEO of Bengaluru-based Zerodha, said, “From the start of our business, we were focusing on F&O traders. But the trading crowd in India is very small; it’s not more than five or 10 lakh, so we had to broaden the target group.”

Zerodha offers a zero-brokerage plan on delivery trades to investors, who pay as much as 2 per cent on trade value as brokerage at full-service brokerage houses. The migration to discount brokers holds true at Samco Securities (over 90 per cent rise in active clients) and Upstox, formerly RKSV, which saw its active client base increase by 23.65 per cent.

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