A STUDY ON DISCOUNT BROKING FIRMS IN INDIA

INTRODUCTION:
WHAT ARE BROKERAGE FIRMS:
Brokerage firms act as a liaison between their clients and the stock exchange.
Their primary function is to buy and sell financial products, including stocks, on
behalf of their clients. Brokers pool resources to help their clients negotiate how
things work in the stock market.
These firms perform some important functions:
They facilitate transactions in the stock market by connecting buyers and sellers
of financial securities.
They often take care of the paperwork that goes into making the trades for a
client legally sound.
In exchange for their services, brokerage firms generally charge a commission
on each trade they carry out. This commission is called a brokerage fee. It is
usually a percentage of the value of each transaction executed by the firm.
CLASSIFICATION OF BROKERS IN INDIA
Brokers in India are classified into two types based on the services they offer
and the fee they charge:
Full-service Broker
Full service brokers offers you the trading platform and trading account in order
to trade, also offer value through this advisory capacity. A full service
brokerage firm offers its clients guidance and advice on how to invest your
money, how much to invest and where to invest. Full service brokerage firms
also offer portfolio management services, meaning a professional will be
making sure your portfolio is frequently updated and the fat is trimmed. The
trade-off, of course, is the increase in fees you pay, as you are essentially hiring
someone to do the trading for you.
Discount Broker
The discount brokers (flat fee brokers or budget brokers) are online stock
brokers offering low-cost brokerage services. They are technology driven
brokers with low operations cost. Most discount brokers do not offer add-ons
like research, advisory (trading tips), PMS, Wealth Management, dedicated
relationship manager and local branch support. This allows them to offer trading
at a very low brokerage charges.
The discount brokerage firms charge over 60% lower brokerage fees in
comparison to full-service brokers. They offer free online trading software to
all the customers
TYPES OF BROKERAGE SERVICES
Full-service brokerage firms
Full-service brokerage firms offer a wide variety of services:
They help clients to buy and sell financial securities on the stock exchange.
They offer access to a wide range of asset classes. This includes not only stocks
but also bonds, forex, commodities, and other derivatives.
They offer a suite of research and advisory services. Typically, they have a full-
fledged research and analytical team.
They maintain physical offices and branches that clients can visit.
Because of the array of services on offer, the commissions are relatively high.
Discount brokerage firms
A discount brokerage firm is the bare-bones version of a full-service broker.
They do not maintain many physical offices. They run operations from a
centralised hub, and use the telephone and the internet to reach customers.
The perk here is that brokerage fees are quite low.
Authorized Person
A Authorized Person acts on behalf of a brokerage firm as its franchisee. To
perform this function, Authorized Person is registered at the Exchanges (BSE,
NSE, MCX etc.)
Authorized Person funnel business from customers to the larger entity.
They cannot execute trades on their own.
They have at their disposal the research materials and investment proposals of
the brokerage firm they represent.
Robo-advisers
Robo-advisers are software products which help customers manage their
portfolios without the need to get advice from a broker. Here’s how they work:
They build a financial portfolio based on the client’s investment goals. They can
rebalance a portfolio automatically as and when required.
They provide financial services at affordable rates.
To get the best results, customers must share details of their income, taxes, and
other financial information with the software.
OPENING ACCOUNTS WITH BROKERAGE FIRMS
Once a customer signs up with a brokerage firm, they have to open three types
of accounts:
Bank account: This is necessary for transferring funds to and from your trading
account when buying and selling securities.
Demat account: It stores all your shares in electronic form.
Trading account: This is used to place orders to buy or sell financial securities.
Some customers may already have a bank account or a demat account. So, their
next step should be to link all the accounts. This is necessary for starting to
trade or invest in the stock market

WHAT ARE DISCOUNT BROKEAGE FIRMS

Discount brokers are those brokerage firms who charge a reduced
fee/commission for helping investors purchase and sell on the stock markets.
Such discount brokers utilize the best of technology to provide a sophisticated
trading experience. Additionally, unlike traditional brokers wherein they get
extra commission for recommending certain stocks, discount brokers have no
hidden agenda in helping you choose the right investment option for you. They
don't provide any investment advice or tips.
Before the emergence of better communications technology, only individuals
with a far above average annual income could afford a broker and access to the
stock market.
However, the Internet has brought an explosion of discount online brokers that
allow individuals with smaller capital to trade for lower fees and with less
capital. In terms of the stock market, most discount brokers operate through
online platforms. As a result, a discount broker is nearly synonymous with
online brokerages.
The most popular discount brokers India 2023 includes Zerodha, Groww, Angle
One based on number of active clients.

As per year 2023

How a discount broker differs from a traditional one?
Discount brokers in India differ from their traditional counterparts in several
aspects. While you may find trading services at the core of both their
businesses, the difference lies in:
Brokerage charges
Discount brokers in India mostly charge a flat fee of Rs. 10 –20 per executed
order. However, traditional brokers may claim a percentage of the trade value as
a commission fee. It may vary from as low as 0.10% to as high as 0.75%.
Service type
For a full-service broker, the portfolio may extend much beyond providing just
trading services. It may include offerings like:
Market insights
Research
Tax advisory
Wealth management services
Depository services
Systems for providing these services are manned by teams of highly paid
analysts and advisors. It adds to the administrative overhead of the traditional
brokers and pushes up the price tag for their services.
On the other hand, discount brokers run their business on a “no-frills” model.
By focusing only on core transactional services, they cut down on costs. The
benefits are passed on to you in the form of reduced pricing. Moreover, discount
brokers conduct their businesses online. It further contributes to reduced costs
and enhanced accessibility.
Market inputs
If you are a seasoned investor capable of conducting your research, you can opt
for a discount broker. On the other hand, if you are new into trading and can’t
track and understand the markets, traditional brokers are your best bet. This is
because they have their in-house team of highly experienced researchers, who
gather the required information that helps you make an informed choice.
Customer support
Apart from providing core services online, most of the customer
communications from discount brokers are through web-based services like
email and chats. The best discount brokers in India are using chatbots,
integrated with AI and machine learning, to offer 24x7 customer support
services.
Traditional brokers, on the other hand, use a mix of both online and offline
services for customer interactions. In addition to digital modes, physical
touchpoints like relationship manager assistance, branch servicing, doorstep
servicing etc., are also deployed.
The final word
So, in case you undertake high volume trades and have the requisite knowledge,
it is advisable to go with a discount broker. It will help in maintaining your
profitability in the long run. On the other hand, if you need expert guidance on
trading and understand the market nitty-gritty, you must opt for the services of a
traditional broker.

DISCOUNT BROKERS IN OTHER INDUSTRIES

Discount brokers can also be found in the real estate and other financial services
fields. Discount brokers in the real estate industry help individuals buy and sell
properties. These discount brokers also have access to the same home listings as
full-service real estate agents and help clients to access that directly for a fee,
but they do not take the client through the purchase as a traditional realtor
would.

Discount brokers may also sell insurance products—although, again, they do

not provide professional financial advice. In general, if you know exactly what
you need and want, you can probably find a discount broker that will do as you
instruct for less money than an advice-oriented broker would charge.
INTRODUCTION TO COMPANY
GROWW
- There's just one right way
What is GROW
Groww is a Bangalore based broker offering online flat fee discount brokerage
services to invest in Equity, IPO, and Direct Mutual Funds. Groww is the brand
name for Next billion Technology Private Limited who is a SEBI registered
stockbroker and a member of NSE and BSE.
Established in 2016, Groww initially started as a direct mutual fund investment
platform. In the mid-2020s, Groww expanded its product offering to include
Equity trading. The company also offers Digital gold, US Stocks, and Fixed
Deposit as other investment options for its customers.
Groww charges a lower of Rs 20 or 0.05% per executed trade. You pay a max
of Rs 20 as the brokerage for an order irrespective of any quantity or amount.
Groww offers Free Mutual Fund services with no charges in investing or
redemption of mutual funds.

Groww has its own trading platform called Groww (web and mobile trading
app) that offers a seamless trading experience to its investors. It is a safe and
secure app with 128-bit encryption. Groww is one of India's fastest-growing
platforms with a strong customer base of 90+ lakh users as of Nov 2020. It is
also one of the highest-rated App (4.5+) in the Google Play Store and App
Store.
Groww is an online broker. Unlike full-service brokers, it does not offer any
tips, recommendations, and research services. Groww has free eBooks,
informative and educative blogs, and resources to help investors/beginners learn
the basics of stock market trading and investment that can assist them to make
an informed investment decision.
Currently in 2023, Investment options available with Groww are
shown in image below.
GROWW FOUNDERS
In 2016, four Flipkart employees – Lalit Keshre, Harsh Jain, Ishan Bansal and
Neeraj Singh, quit their jobs to start a venture that could make investing easy.
They called this venture Groww and started operations In 2017.
Groww’s Founders
Lalit Keshre- Co-founder & CEO

Lalit is the CEO of Groww. Lalit looks after all the aspects of the business,
predominantly the product and customer experience at Groww. Before starting
Groww, Lalit was in a senior product management role at Flipkart, where he
launched and led Flipkart Quick and helped launch Flipkart Marketplace.
Earlier, Lalit founded an online learning company called Eduflix, and he has
also been an early team member at Ittiam Systems
Harsh Jain-Co-founder & COO

Harsh Jain heads Growth and Business at Groww. Before Groww, Harsh was
part of the product management team at Flipkart. Previously, Harsh had co-
founded a story-telling start-up. Harsh holds a B-Tech in Electrical Engineering
and a Masters in Information and Communication Engineering from IIT Delhi.
He studied for his MBA in product management and marketing from UCLA
School of Management.

Neeraj Singh – Co-founder & CTO

Neeraj heads product development and customer research at Groww. A

passionate engineer, solution developer, and coder, Neeraj was with Flipkart as
an engineering manager and has built the Flipkart customer returns and refund
system before starting Groww. Neeraj holds a BE degree in Information
Technology from ITM, Gwalior and a PG Diploma in Advanced
Computing from CDAC.
Ishan Bansal –Co-founder and CFO
Ishan heads Finance at Groww. Earlier, Ishan worked at Flipkart in the
corporate development domain. He has also handled corporate development and
M&A at Naspers. Ishan graduated from BITS Pilani, holds an MBA in Finance
from XLRI, Jamshedpur and is a CFA charter holder.
GROWW’S HISTORY
Based on their own experience and that of their friends and acquaintances, the
founders felt that the process of investing in financial products in India is too
complex and opaque. There are close to 200 million people with investable
income in India, while only 20 million actively invest.

The only way to bring the next 180 million on board is by making investing
simple. Groww aimed to provide the necessary information, resources and user
experience for people to start investing in the simplest way possible.
Initially, the founding team took a lot of time to understand the market and
identify the users’ fundamental pain points. They also had to do a lot of
experiments to figure out the right user experience. Also, because the user’s
hard-earned money was at stake, they had to ship a safe and secure product, and
that took them some time to build.
In 2017, Groww started as a direct mutual fund distribution platform and within
a year became one of the most popular mutual fund investment platforms in the
country.
Following user demand, Groww added stocks in the early half of 2020 and the
same year launched digital gold, ETFs, Intraday trading, IPOs in quick
succession. Today, more than 1.5 crore users across 900+ cities across India
trust Groww for their investment needs.
Groww Funding Details
In January 2019, Groww raised $6.2mn in a Series A funding round led by
Sequoia India. American seed accelerator Y Combinator, Propel Venture
Partners and Kauffman Fellows also participated in the investment round. The
company had earlier raised $1.2 million in Pre-Series A led by Insignia Venture
Partners, America’s Lightbridge Partners and Kairos fund. Groww had raised
seed funding from Cure Fit founders Mukesh Bansal and Ankit Nagori along
with Y Combinator in January 2018
In September 2019, Groww raised $21.4m in Series B funding round from US-
based VC firm Ribbit Capital. The round also saw participation from existing
investors Sequoia India and Y Combinator
Groww Business Model
Groww Business Model works on the concept of making money by charging
Mutual fund provider companies instead of charging their users which is why
Groww is called a direct mutual fund and Also it is why Groww Markets itself
as Least Fee Charging Mutual Fund and Stock Broker Company.
But the company profit is replyed on the funds they sell, which is a very
complex process. let’s understand how it works
In mutual funds, there are two types of investments Regular and Direct.
In Regular mode, the user has to buy mutual funds through their distributor who
charges an X% of commission for the service. The Commission amount is
charged in such a way that your investment and profit amount will be
compensated.
In Direct mode, the users can choose multiple mutual funds and stocks in a
single platform like Groww
Groww and other direct investment platforms’ only aim is to increases their user
base and To reach the right set of audiences Groww uses technology that
reduces the operating cost significantly.
Also, users don’t need to switch between multiple investment platforms so that
the customer will stay long in their platform, and due to current technological
advancements, users can stay invested 24/365 from anywhere around the world.
So, How Does Groww Make Money?
In Simple, Groww Make Money by providing premium features such as
advisory services on investment and portfolio.

Groww Revenue
The company’s profits increased 4.7 times To over Rs 1 crore in FY20 from Rs
20.14 lakhs in FY19. Operating income increased 3.25 times to Rs 52.05 lakhs,
with financial assets making an additional contribution of Rs 48.24 lakhs.
The Y Combinator-backed company saw a respectable increase in earnings but
still lags behind its competitors Zerodha and Upstox, which generate earnings of
Rs 1,094 crore and Rs 148 crore respectively. Groww earned a total of Rs 1
crore in FY20, while ET Money earned a total of Rs 2.24 crore.
They are expanding rapidly but the founders of Groww have taken the company
to unicorn status. They recently received money and were named a
unicorn start-up.
Groww Acquisitions
Groww has acquired only one company to date which is India bulls AMC On
11th May 2021 for around Rs 180 crore.
Groww strategically acquired this company to enter in Asset Management
business.
On September 10th Competition Commission of India ( CCI ) has approved
Groww’s acquisition of India Bulls AMC.
HOW GROWW AS A DISCOUNT BROKER BETTER THAN
TRADITIONAL BROKER
Discount brokers are ideal for new or small investors
Zero/Low Commissions: Discount brokers charge very low commissions on
your orders. In fact, Upton levies zero commissions for delivery trades!
Time and efficiency: Discount brokers need to keep costs low, and are therefore
incentivised to offer efficient, new age, zippy platforms that help you place
trades with no lag.
Powerful Analysis Tools: Discount brokers give you the tools you need to
analyse and study markets on your own. For example, Upstoxoffers more than
100 charts so that you can back your decisions up with tangible data!
Better Tech: Discount brokers are more likely to be offering more convenient
and updated services - such as an online demat account that eliminates
paperwork and further reduces costs not only for the client but also reduce
overhead costs that works in the favour of the broker’s business model.

OBJECTIVES OF STUDY
1 - To study how discount brokers are better than traditional brokers.
2 - To study the business model of discount brokers
3 - To study the future of discount brokers in India.
4 – To know the popular discount broking app in India

LITERATURE REVIEW

Bhanu Pant and Dr. T.R. Bishop (2001) analysed the behaviour of each day and
weekly returns of five
Indian stock market indices for random walk in the course of April 1996 to June
2001.They discovered that Indian inventory
Marketplace Indices did not observe random walk.
Nath and Verma (2003) look at the interdependence of the 3 foremost inventory
markets in south Asia inventory
Market indices specifically India (NSE-Nifty) Taiwan (Taye) and Singapore
(STI) via employing bivariate and
Multivariate co integration evaluation to model the linkages among the
inventory markets, no co -integration was
Found for the entire duration (every day records from January 1994 to
November 2002). They concluded that there's
No longer term equilibrium.
Debian Mukherjee (2007) made a comparative evaluation of Indian stock
market with worldwide
Markets. His observe covers Ny stock trade (NYSE), Hong Kong stock
alternate (HSE), Tokyo inventory
Exchange (TSE), Russian stock alternate (RSE), Korean inventory exchange
(KSE) from numerous socio- politico-
Financial backgrounds. Each the Bombay inventory trade (BSE) and the
country wide inventory trade of Indian
Restrained (NSE) were used within the study as a part of Indian stock
marketplace. The main objective of this observe
Is to seize the traits, similarities and patterns in the activities and moves of the
Indian inventory
Market in contrast to its worldwide counterparts. The time period has been
divided into diverse eras
To test the correlation among the diverse exchanges to show that the Indian
markets have emerge as more
Included with its worldwide counterparts and its response are in tandem with
which can be visible globally. The
Various stock exchanges had been in comparison on the idea of marketplace
Capitalization, range of listed
Securities, listing agreements, circuit filters, and settlement. It may correctly be
stated that the markets do react
To worldwide cues and any taking place inside the worldwide state of affairs be
it macroeconomic or use specific (foreign
Trade channel) have an effect on the diverse markets.
Juhi Ahuja (2012) provides a evaluate of Indian Capital marketplace & its
shape. In ultimate decade or so, it has
Been discovered that there was a paradigm shift in Indian capital marketplace.
The utility of many
Reforms & tendencies in Indian capital marketplace has made the Indian capital
market similar with the
International capital markets. Now, the marketplace features an advanced
regulatory mechanism and a current
Market infrastructure with developing marketplace capitalization, market
liquidity, and mobilization of resources.
The emergence of private company Debt marketplace is also a very good
innovation changing the banking mode of
Corporate finance. But the market has witnessed its worst time with the latest
international economic disaster
That originated from the united states sub-high loan market and unfold over to
the complete international as a
Contagion. The capital market of India added a gradual overall performance.
Kajal Gandhi (2015), Retail investors Participation in Indian stock market- A
Survey, GJRA - global magazine
For studies analysis (Vol.4, problem-02), ISSN No 2277 - 8160: paper findings
were primarily based at the survey
Which has been performed among 5 towns-Mumbai, Delhi, Kolkata, Chennai
and Ahmedabad. The
Respondents of the metro towns are more inclined in the direction of making an
investment in stock market as they remember it as
Economic device however they don't have knowledge or do not choose to rent a
professional to control
Their portfolio because of which they fall prey of losses. But, humans at Tier-II
cities like Ahmedabad nevertheless
Bear in mind the traditional funding like gold, belongings, gold and financial
institution deposits are their favourite option this
Is due to slender minded as there is low saving conduct, low consciousness of
funding opportunities.
Indian Streams studies magazine (June 2013) –
based in this study have a look at confers that most of the traders having focus
approximately the products being dealt through the stock exchanges. Stock
agents are imparting periodical replace, newsletters and private touch with
customers. Some of the traders are equipped to take high hazard inside the stock
market. Buyers would really like to generate cutting-edge profits as well as
capital appreciation via stock marketplace. Broker proportion gives treasured
studies services to their customers. They should make use of opportunities for
extracting investment advantages. Consistent with this study infers that
investors having tremendous belief closer to stock marketplace and they invest
in step with the condition of the market.
Kauffman et al. (George, 2000)-
This observe changed into done in 2000 indicated that, due to the in-depth
essence of facts, most traditional shape of stock buying and selling market
gamers will eventually pass in the direction of leveraging IT in order to perform
their corporations in an internet-primarily based trading way. This in flip brings
approximately many capability advantages for the customers i.e. The traders,
consisting of quicker trading speeds, higher records transparency, and plenty
lower working fees.

RESEARCH METHODOLOGY

A research design is purely and simply the framework of plan for a study that
guides the collection and analysis of data. The study is intended to find about
discount brokers people presence towards them , how they are more beneficial
than traditional brokers and there scope in India

Selecting the research method is of utmost importance while handling the

empirical part of the research. After choosing the appropriate research method,
planning and making research decisions, understanding its ethical implications
and reporting the findings with a view of answering the main research question
of the thesis is important.

The researcher of this work has aimed to receive information about discount
brokerage firms in India and have tried to know the view on discount brokerage
firms by different categories of people including undergraduates from age group
18-21, post graduates from age group 21-24. And family members investing in
stock market
In this research we have studied -

 behaviour of people towards discount brokers

 their choices and preferences about which discount broking firm to use
 their income ranges
 their thought processes on future of discount brokers
 their investment knowledge

To complete this research, the above-mentioned parameters were chosen as I

believe these are the most helpful tools to understand people’s behavioural
patterns and their preference while choosing a broker

SAMPLING DESIGN:

Selection of the sample size: 65

LIMITATIONS OF THE STUDY

1) As the data was collected through questionnaire, there might be chances

of biased information being provided by the respondents.

2) Small sample size of the study could not have been able to decipher some
important dimension of the study due to time constraints.

3) The study is confined to only those who are existing users of Discount
broking apps

4) Area of the study was limited to my personal contacts in the near by area

PRIMARY DATA