India Broking Sector Industry Analysis Report | Scrolls

by Karnivesh | 2026

Comprehensive Analysis of India's Broking Sector Report.pdf

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India’s stock broking industry is undergoing one of its most significant transitions since the rise of discount brokers a decade ago. What began as a technology-led democratization of market access has now entered a phase of structural maturity shaped equally by scale, regulation, and the need for sustainable monetization. The sector today sits at the intersection of unprecedented retail participation and the most stringent regulatory oversight it has ever faced.

Over the past five years, retail investors flooded into capital markets, driven by low interest rates, digital onboarding, and simplified trading platforms. Discount brokers emerged as clear winners, capturing the bulk of new clients and compressing brokerage fees close to zero. By FY25, trading volumes particularly in derivatives had reached record levels, with F&O activity accounting for the majority of broker revenues despite involving a relatively small subset of clients. This volume-led boom masked a growing structural fragility: extreme dependence on derivatives for profitability.

That fragility was exposed as the regulatory stance of Securities and Exchange Board of India shifted decisively toward investor protection and systemic risk reduction. A series of measures higher STT, restrictions on weekly expiries, tighter margin norms, and the True-to-Label framework reset the economics of retail trading. By Q1 FY26, industry derivatives volumes had fallen by nearly 40%, triggering the first broad-based revenue contraction the sector has seen in years. Even market leaders were not immune. Zerodha reported its first-ever revenue decline, Angel One saw sharp profit compression, while Groww proved relatively resilient due to its stronger tilt toward long-term investment products.

Yet, beneath this near-term disruption lies a powerful structural story. India’s retail investor base continues to expand, increasingly driven by Tier-2 and Tier-3 cities. Assets under management across brokers now stand near ₹50 lakh crore and are projected to double by the end of the decade, supported by rising SIP penetration and steady financialization of household savings. Mutual funds, once peripheral to broker economics, are emerging as the sector’s most stable growth engine, offering annuity-like income and deeper client stickiness in contrast to volatile trading revenues.

As a result, the industry is being forced into a fundamental business model pivot. Brokerages are no longer competing primarily on pricing or trading volumes; instead, they are racing to build diversified financial ecosystems. Wealth management, margin lending, mutual fund distribution, and subscription-based services are moving from optional add-ons to core revenue pillars. The goal is clear: replace cyclical, regulation-sensitive income with recurring, balance-sheet-light earnings streams.

This transition, however, is neither easy nor evenly distributed. Client acquisition costs are rising even as lifetime value declines, competition remains intense with over 700 registered brokers, and monetization outside metros remains structurally weaker. Smaller or under-capitalized players face mounting pressure as compliance costs rise and arbitrage-driven models disappear. In contrast, scale, capital strength, and regulatory readiness are becoming decisive advantages.

Looking ahead, the sector’s future appears less explosive but far more durable. Client growth is expected to continue, albeit with lower trading intensity. Revenues are likely to remain subdued in the near term but recover gradually as diversification gains traction. Most importantly, industry structure is set to consolidate, with the top 10 brokers potentially controlling close to 80% of the market. For these leaders, a post-pivot return on equity of 15–20% looks achievable not through speculative trading, but through disciplined cross-selling and long-term investor engagement.

In essence, India’s broking industry is evolving from a high-octane trading marketplace into a broader retail financial services platform. The winners of the next decade will not be those who onboard the most traders, but those who successfully convert millions of first-time participants into long-term investors while operating within a far tighter regulatory framework.