Some of the investors, whose confidence was shaken due to brokerages defaulting, have started shifting to security companies backed by banks, especially those that the government owns
In 2020, about 14 brokers were either declared defaulters or exchanges expelled them. Brokers like Karvy Stock Broking Ltd. and Anugrah Stock & Broking Pvt. Ltd. were in the news as the number of clients and amount involved was large. Others were smaller, lesser-known.
Some of the investors, whose confidence was shaken due to brokerages defaulting, have started shifting to security companies backed by banks, especially those that the government owns.
According to an independent stock analyst, who has been advising investors for over two decades, “Since the famous stock market scams, I have always maintained broking account with a public sector bank. The broker may lack behind in technology compared to private brokerages, but I believe that the chances for default or misappropriation are low."
On the flip side, most brokerages that banks back charge a higher fee. “They are suitable for those who don’t trade regularly," said the analysts. For those who are into intraday trade or futures and options, the bank-backed brokerage would be expensive.
According to him, many of his clients that invest for the long term have shifted to brokerages that banks back as they feel safer. They think big banks that offer broking services are less likely to violate Securities and Exchange Board of India (Sebi) norms.
Some private brokers (not backed by banks) don’t charge any fee if the client is taking delivery, or charge a small flat fee for it. For intraday trades, they charge a flat fee ( ₹10 or ₹30 per lot) irrespective of the amount of trade. Most bank-backed stockbrokers are not as competitive when it comes to the broking fee.
The top 10 brokers by number of active clients include Zerodha Broking Ltd, ICICI Securities Ltd, HDFC Securities Ltd, Sharekhan Ltd, and Kotak Securities Ltd, Axis Securities Ltd, Angel Broking Ltd, Motilal Oswal Financial Services Ltd, IIFL Securities Ltd and SBICAPS Securities Ltd.