Brokerages on a song with rising retail participation

The Covid-19 pandemic brought every industry to its kneesin 2020, but one segment that not just beat the fever but was strongly up on its feet was brokerage. ICRA expects the broking industry to clock a record income of ₹27,500-28,500 crore in FY2021, registering 30-35 per cent growth (₹21,000 crore in FY2020) and beating the rating agency’s earlier estimate of ₹23,000 crore.

Active retail participation

One key reason for the stellar comeback of the broking industry is the huge participation of retail investors. Contrary to the expectation, new investors entered the stock market during the lockdown in their droves.

Recently, the Central Depository Services (India) (CDSL) said that active demat accounts have crossed the three-crore mark; of this one crore came in just in the last 12 months. Active client numbers on another depository NSDL have crossed 2 crore.

AI-enabled service

With the new breed of investors entering the market, broking firms, too, have turned creative on both the technology and service fronts. With seemingly little headroom for the Indian benchmarks to grow after the stellar rally, brokerages have started offering global stocks to domestic investors for diversification. Most have entered into tie-ups with global platforms such as Vested Finance (Prabhudas Lilladher and Axis Securities), Stockal (HDFC Securities and Geojit Financial) and Interactive Brokers (Kotak Securities) and Globalise.

ICICI Direct has launched an ‘i-Alert’, which is an automated mechanism to help investors gauge the risk associated with the stocks that they choose to buy. i-Alert will prompt customers when they initiate purchase of any stock with weak fundamentals so that they are aware of the risks.

Geojit Financial Services, through its Smartfolios platform, has tied up with Lotusdew, a US SEC/SEBI regulated firm, that uses behavioural finance and artificial intelligence (AI) to identify dominant market conviction to pick and offer stocks accordingly. Through this partnership, Geojit will offer a set of new small- and mid-cap stocks called Lotusdew Prestige, picked for their potential after analysing corporate events like M&A announcements, earnings surprises, order book wins, dividends, stock splits, etc..

To boost the investing prowess of the retail investor, Angel Broking has enabled integration of its API via SmartAPI. The feature is free to integrate with any platform including start-ups and stock advisories. It empowers algo traders to execute real-time trades via Angel Broking along with the option of deploying their programs in five programming languages.

Similarly, Motilal Oswal Financial Services through its subsidiary, TM Investment Technologies, has launched TejiMandi, a stock market investment service for retail investors. With the minimum investment advice starting at ₹20,000, the product makes equity advisory significantly more accessible compared to PMS products where the minimum ticket size is usually ₹50 lakh.

The industry profitability level is expected to be supported by the growing retail share coupled with the increase in interest income through margin funding, said ICRA. So, brokerages do their best to facilitate easy trading and keep retail investor interest alive in the market.

However, investors should aware of their own risks and margin of safety before investing.