We have briefly discussed stockbrokers in India in our previous blog post but this blog will completely emphasize different types of stockbrokers in India. Also, we will discuss their functionality and authoritativeness in the capital markets in India.
We often feel confusion regarding, ‘which stockbroker is best between traditional or online?’ or to be more specific, ‘which online stock broker provides higher leverages?’
In this blog, we are going to discuss about various stockbroker in India. Also, check out our previous post on “Market Participants In The Stock Market of India“.
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What do you mean by Brokerage Houses in India?
Table of Contents
A brokerage house, commonly known as the broker, is an institution that acts as an intermediary facilitating your buying/selling transactions with securities such as mutual funds, stocks, ETFs, and other asset classes.
Before we move further, let’s see what SEBI (Security and Exchange Board of India) says about brokerage houses in India?
As per the instructions passed by SEBI- “all the traders or investors playing on the stock exchange must be routed through an authorized member of the stock exchange of India – a brokerage house.”
How do brokerage houses work?
The core functionality of a brokerage house is to facilitate your transactions (buying and selling of securities in the exchange), give you investment-related advice, recommend better tax-planning options, and deliver a plethora of asset management services. They guide you throughout your investment in the stock market journey. There are primarily two brokers in India – traditional or full-service stockbrokers, and discount or online brokers.
Traditional or full-service stockbrokerS IN INDIA
Traditional stockbrokers provide a range of financial services to their clients. If you enroll with a traditional broking firm, it allows you to access services such as trading in different asset classes, research and advisory, investment banking, sales and asset management, and other miscellaneous assistance.
If you are willing to invest funds in IPOS, FPOs, FDs, Mutual Funds, Forex, Bonds, and Insurance at the same time, traditional brokering is something you should look for.
In India, the stockbrokers are growing with a significant speed in both NSE and BSE. You may also find, in some cases, in-house banking and Demat accounts within the brokerage house. Some of the famous full-service (traditional) brokers in India are SHAREKHAN, MOTILAL OSWAL, INDIA INFOLINE, HDFC SECURITIES, KOTAK SECURITIES, ICICI DIRECT, etc.
Advantages of choosing traditional stockbrokers in India
- With traditional brokering, you tend to get extra services such as commodities, currency trading, advisory, research, asset management, investment banking, and more.
- You will get better advisory services in terms of stocks and securities as per your risk appetite and objectives.
- You can find recommendations (though the recommendations are just a form of prediction. it’s advisable to go with a stock after your due diligence).
Disadvantages of choosing traditional stockbrokers in India
- Traditional stockbrokers remain at a costlier side due to extra facilities. Traditional stockbrokers charge higher commissions in comparison to discount brokerage.
- The high commission rate can cause you a major chunk of your profit (the situation can be more severe in terms of loss).
if you are a person who knows ‘how to manage funds efficiently?’ or who can afford high rates of commission’, the traditional brokerage house is right for you.
What is an Online or Discount Broker?
In a layman’s language, a discount broker offers essential services (that are required for trading and investing in stock markets in India) at an affordable rate of commission. Its primary services include buying and selling securities in the security markets.
For discount (online) brokers, the unique selling point (USP) is that they provide smart, fast, and cutting-edge technologies to the traders at lower operational costs. Unlike traditional brokerage houses, full-time advisory services costs are not included in discount (online) brokering.
They provide a dedicated platform to their clients on which the clients can perform various market activities (such as buying, selling, Intraday, etc). These platforms are multi-device friendly which means you can use them on desktop, web, or even on mobile devices.
Advantages of choosing discount STOCKbrokers IN INDIA
- Discount brokers are highly technical and provide high-end, up-to-date technical support – such as dematerialized share allotment and holding. Elimination of paperwork also plays an important role in the overall cost reduction of operational expenses.
- Commission rates are less or negligible in comparison to traditional brokerage firms.
- They are quick and efficient, save a lot of time by providing on-the-go trading options through your desktop, laptop, or mobile phone.
- Better analytical tools and charts are provided to the clients to make a much-informed purchase.
Disadvantages of choosing discount STOCKbrokers IN INDIA
- You cannot get advisory services and other recommendations.
- If you are a novice investor or trader, individual trading or investing can cause loss (unless you do not have the right knowledge about what you are doing).
We assume that you have accumulated a good amount of information about different stockbrokers in India. If you have made your decision to go with a particular broking firm, make sure you check its reputation, experience, hidden charges, fund securities, etc. beforehand. And if you are still confused between the two, see this report.
Security and Exchange Board of India (SEBI) has also shared its guidelines from time to time to make traders and investors aware of the recognized stockbrokers in India. You can find the list here.
Key Takeaways From This Chapter
- You can find the right community of people having the right mindset towards the stock market. Join
- A brokerage house, commonly known as the broker, is an institution that acts as an intermediary.
- Brokers facilitate your transactions (buying and selling of securities in the exchange).
- Traditional brokers provide a wide range of financial services to their clients.
- A discount broker offers essential services (that are required for trading and investing in stock markets in India) at a cheaper rate of commission.
- List of stockbrokers in India as per their market share is here.
Frequently Asked Questions
Do stockbrokers get your money?
While it’s unusual that a broker will actually withdraw his client’s money (though that does occur), typically the “stealing” of investment capitals appears in the form of other fraudulent violations of securities law and FINRA (The Financial Industry Regulatory Authority) laws which leads to major investment losses.
What is the maximum limit of brokerage A broker charge?
The highest brokerage that a broker charges as per the Stock Exchange Regulations and hence, it may vary across various markets. As per the BSE & NSE Bye-Laws, a broker cannot charge more than 2.5% brokerage from his clients.
Can You Trust stockbrokers?
As a client, however, you should nevermore trust your broker, and we don’t mean that individually. You can relish your broker, think him intelligent, or find him valuable. You can ask her for stock analysis or opinions. All too frequently, investors caught by their stockbrokers, emotionally.
How does SEBI manage the broker?
The stockbroker and customer shall arrange and resolve their accounts from time to time as per the Acts, Regulations, By-Laws, Circulars, Notices, and Guidelines issued by SEBI and the dedicated Exchanges where the trade happens.
How many stockbrokers are in India at the time?
There are above three hundred stockbrokers in India listed with SEBI and various stock markets. Even on National Stock Exchange (NSE), there are 314 designated stockbrokers in India (including defaulters or expelled) as of 30th June 2021.
This is a great learning experience. Thanks for sharing this knowledge with us.