I know the some numbers are showing degrowth but look at the over all numbers. Cash or Equity segment did show less ADTO but their majority revenue comes from FnO and Commodity trading, which if you notice have grown QoQ and also YoY.
I was very positive about Q1 client and ADTO numbers because the kind of resilience markets have shown for the last 6 months. It shows the kind of participation retail investors have took for last few months and haven’t budged even after this long and painful consolidation.
One can also look at the price movement today. 4% up. This shows optimism, w.r.t the numbers of June Month.
Please show the data to confirm this thesis. From what i have seen angel has been outgrowing all large competitors like zerodha, icici, hdfc, axis, upstox
Coming quarters will show the actual position. They are doing well in f&o. As per the chatter in brokerage ciricles mstock and bfsl are also making big strides in client acquisition and they also have superior products than angel is currently offering like mtf interest rate 8 percent. The stock is a buy only once it is crossed it’s all time high with volumes. Otherwise it may struck in a range.
Hi Guys,
There is a broker FINVASIA which is a 0 brokerage company and recently they closed their NRI segment. Let me explain why?
So in NRI account you never transfer money to broker account and money lies in your account which gets updated everyday.
Suppose I buy a security today so at the end of the day the broker has to report blocked funds in their account regarding that buy but this blocked funds is their money and not clients money.
The same day they send a report to the bank to release funds for the clients purchase and the bank releases those funds next day. You can see the broker is having a negative cash flow which resulted into losses and they closed this segment.
When you apply for IPO you fill ASBA form which is Application Supported by Blocked Amount. You amount gets blocked in account and gets directly transferred to the merchant banker.
The broker used to make a lot of money for this positive cash flow. Money lying in your trading account. They still earn but it has reduced and there are many loophole in the system.
My overall point of explaining all of that was SEBI is now considering ASBA for secondary market which will be a big blow for all the discount brokers. That means you will never have to transfer money to your trading account.
If you go to screener their are close to 50 to 60 broker listed. Think about unlisted?. This space is over crowded and I feel in the next 5yrs it is a race to 0 brokerage.
I don’t see a bright future for brokerage companies. SEBI reduced leverage and now if ASBA comes in it is going to be a big blow.
I feel this industry will go through a consolidation and top 1 or 2 broker will have maximum market share, rest all are going to shut their shops. I also feel over the years I wont be surprised to see the brokerage close to 0 to acquire clients to survive and have a spot in top.
I might be completely wrong about the industry and above are my personal views
Hi Guys let me explain my previous post in detail.
In USA there is 0 brokerage system this is not possible in INDIA because SEBI has closed all doers from broker to earn money after the karvy fraud.
I would like to first give a brief what SEBI has done till now and then give my view what they are planning to.
Earlier broker used to have pledge stock in their account which they used to pledge with NBFC. The money they used to get from NBFC was given to client. Interest difference was their profit. Now they cannot pledge with NBFC and the shares are in depositary so now it is brokers money give to client.
Idle balance in trading account was earning interest from broke. Now there is quarterly settlement, client can even choose monthly settlement.This source of revenue also gone.
In india broker has to send all orders to exchange where as in USA it can be sent to HFT (high frequency traders) and these HFT offer rebate to brokers for sharing this data(order flow).This is not allowed in india so again this source of revenue also gone.
Because of CDSL and NSDL brokers cannot do security lending. In US all securities are held in their brokers name.
SEBI introduced the new margin rule which was again a big dent to these brokerage companies.
SEBI was preparing brokers for ASBA by introducing quarterly settlement. Once ASBA gets introduced the brokers are just messenger who are sharing clients trade real time with exchange. Again ASBA will be a big blow.
The biggest asset of a brokerage firm is CLIENT DATA and all the data of real time order both of this is being shared with SEBI, Exchanges and depositary. SEBI is building its own ecosystem. They have choked all the broker from all sides and the day they come with T settlement and ASBA that is the end of discount broker.
SEBI can start a direct trading platform free of cost where there is involvement of BANK,SEBI,EXCHANGE,DEPOSITARY. Where is the need of brokers? This is my first case where I see discount broker being finished.
CASE 2- Even If SEBI does not introduce direct trading for sure ASBA is coming. In this case there is going to be panic among brokers and only those brokerage firm will survive who have maximum active client. Every broker is going to give there level best to get more clients. So what is the best way to attract clients? decrease brokerage. In this case out of 500+ active brokerage house only 1 or 2 will survive.
CASE 3- Suppose ASBA is not introduced. Now if you see in Kolkata it is easier to open a brokerage firm than a pani puri stall. There is extremely low barrier to entry. For sure in the next 5yrs there is a new company going to come with a sustainable 0 brokerage business model and disrupt this industry. Who thought 10yrs back that discount brokers will rule?
Overall my view is why should we enter this industry where there is no MOAT and the probability of technological disruption is high. ANGEL can double from here but the day SEBI comes with direct trading this stock is going to crash 50%. So my point that there is extremely high risk in this industry and lot of uncertainty. Exchanges have smartly used brokerage firms from a log time to build their ecosystem and now they are slowly reducing the need of them
Here is the link where NITHIN KAMATH shares his view on 0 brokerage.
I just came across another forum a complete copy of value picker forum. Nithin kamath is very much active here and keep sharing this view. I would also advice every one to go through is post there and ask him his view on ASBA.
It is not replacing Zerodha. It is in addition to Zerodha and also, with ICICI Direct, the demat and bank accounts are with IDFC bank and only trading is with ICICI Direct. Here, they can hope to add customers to its own demat and bank
accounts.
https://twitter.com/Nithin0dha/status/1577974870180507648
Please do go through this tweet. This is what i explained in my previous post that because of negative working capital in NRI segment FINVASIA closed that segment. ASBA might not effect broker because that would most probably be for cash segment but now monthly settlement after quarterly is going to add the pain.
He has clearly mentioned that there will be upward pressure on price. Now as of today I feel only zerodha has a moat in this industry because of their product and service. They can manage to raise price and still not loose many clients but between other brokers there is going to be price war. Zerodha has already increased their brokerage if margin is negative.
In a capitalist economy the interest of business is always held high but in our case lot of focus is going into client protection on the cost of business. The ease of business in this industry is reducing. What I fell is regulators don’t care about business and they will continue to take steps in best interest of customers. The interest of business and customer should go hand in hand which is not the case in this industry and as a result increases the uncertainty here. The brokerage industry is going from the phase what the telecom industry went from.
One last point the previous quarterly settlement was for clients who have not traded in last 30days but this new settlement is for everyone. Even the active client which is rubbing salt to the wound.
