LIVEMINT.COM: Online discount brokers wooing retail investors back to market

Mumbai: India’s brokerages are increasingly turning to online discounts to woo retail investors, wary since the 2008 crash, to the equity market by taking advantage of lower overheads to offer rates that are much lower than those charged by traditional houses for such traders.

While a traditional brick and mortar broker has to charge for rentals and employee expenses, online discount broking firms save on such costs. Lower brokerage commission also encourages traders to capture small moves and helps them make money even amid low market volatility.

The 2008 market crash led to several investors, traders and even brokerages going out of business but those who kept costs to a minimum by relying more on online support and less on branches have been able to grow. Many of them don’t employ extensive research teams as they don’t offer advisory services.

One such firm, Zerodha Stock Broking Ltd, started operations in 2010 and offers broking services at a flat Rs.20 per transaction. Its 25,000 clients rack up about Rs.4,000 crore in average daily turnover.

Online discount broking gained popularity as a concept in the US in the late 1990s and early 2000s, and now dominates the business. It will do so in India as well, according to Zerodha founder and CEO Nithin Kamath.