Last updated on January 27th, 2017
Off late, there is upsurge in internet usage in India. Major portion of the stock trading is being done online. This has given way to to a new generation of stock brokers in India, which are known are as Discount brokers. Discount brokers provide very competitive brokerage charges with good customer service. Lately, discount brokerage is becoming very popular in India as more and more people have access to internet and several people are now investing using their own knowledge.
Who are Discount Brokers?
The discount brokers are special type of brokers who charge relatively lower commissions when compared to market rates. Since the rates are significantly lower, they operate on thin margin hence they mainly operate online. Discount brokers normally do not charge an annual service fee or maintenance fees on their customer’s account.
Discount Brokers in India
Discount broking is a very recent trend that started just few years back in 2010. Discount brokers charge a reduced fee and do not provide investments advice because of the low margin. The best known discounts brokers in India are Zerodha, RKSV, SASOnline and Tradejini. There are also few other brokerage firms in the industry, but based on the customer base these are the largest. Charges are maintained low because discount brokers hire fewer employees, offer fewer products, and no advisory teams to their clients.
Advantages and Disadvantages of the Discount Broker
The biggest advantage of discount broker is cost effectiveness. One would be surprised to see the savings on the commissions when he calculates the yearly brokerage outgo of full service broker with a discount broker
Pros of Discount Brokers
The noticeable plus point of trading with a discount broker is that the trader can save a lot of money when he does a buy or sell transaction. If the same traders trades with full service brokerage, he/she usually have to pay hefty amounts in commissions to brokers. The brokerage structure with a full service broker is based on the volume of the trade. If one trades higher volume, the brokerage will be higher. but with a discount broker, it will be constant irrespective of the volume of trade. So by going with discount broker one can save on brokerage which will help in increasing his profits.
Discount Brokers don’t offer investment advice and initial guidance and just felicitate the transactions of the customers. They offer quality platforms through which the customer can trade and the trade carried out is completely chosen by the customer and broker does not have any involvement.
Cons of Discount Brokers
For the beginners, discount brokers would br difficult as they dont know anything about the market. They should be taught each and every steps and discount brokers wont do that.
Also discount brokers usually does not offer different types of investment products. Most of them do not offer services in IPO, PMS , bonds ,mutual funds etc. To invest in them one has to again open another account with premium brokers.
But considering the cost effectiveness, these days more and more traders are flocking towards discount brokers. One has to experience services of both types of them to really appreciate the suitability of the right kind of broker.
We have written detailed list of top 10 discount brokers. Below are the list of top 5 discount brokers of India
Zerodha is the pioneer in the discount broking as far as India is concerned. They started in 2010 with just 5 people and few number of clients. Today they have grown to the level of giving tough competition to the biggies of the industry such as sharekhan, ICICDirect and Motilal Oswal. Their client base has reached 2lakhs and their daily turnover touching Rs 10,000 crores which is around 5% of the entire market.
They offer zero brokerage on all the investments. That means if you buy shares of any quantity and sell it once they get credited to your demat account then there will be no brokerage fees!. They charge Rs 20 if you sell them on same day.
You can read the detailed review of the Zerodha Brokerage here
Almost similar to Zerodha and based out in Mumbai. Again started by 4 entrepreneurs and grown big. The brokerage charges are also on par with Zerodha. You can read complete RKSV Security review here
SAS Online is most probably cheapest broker of India offering Rs 9 per trade. They also have monthly brokerage plans at Rs 999 and for commodity at Rs 499. They are based out at Delhi. You can read the complete review of the SAS Online here,
Tradejini is Bangalore based discount brokers offering Flat Rs 20 per trade. They offer unlimited trading for first month of account opening. This is a good offer as the trader can try out their services for first before deciding whether to continue with them or not. You can read the complete review of the Tradejini here
Trade Smart Online was established in 1994 as full service brokers as VNS capital and TradeSmartOnline is discount brokerage arm of VNS. VNS has a long track record in Indian stock market. Presently, Trade Smart Online provides online brokerage services in NSE Cash, NSE Currency derivatives, NSE FNO, BSE Cash and commodities. They also offer 50% discount on account opening charges and 50% OFF on brokerage generated out of first month. You can read the complete review of the TradeSmartOnline here.