Context / Climate:

The pandemic world has brought in a large number of retail investors like us into the stock
market. This, more or less, resembles with the Matt Levine’s theory on ‘Boredom Market
Hypothesis’. He states that many amateur traders have come into stock markets due to
sheer boredom. This is because, in lockdown modes, the amount of free time available with
many is a lot. Also, most of them are looking out for quick money. Hence, stock market
seems like a perfect place to them.

However, has this always been the case with India? Let’s take a look!

India has one of the lowest retail stock market participation rates in the world. India's equity
market penetration was under 2.5 percent in 2018. Traditional investment channels such as
gold, real estate, and bank accounts have been popular among Indian consumers. The
currents are shifting. In the fiscal year 2019, India added roughly 50 lakh new Demat
accounts. This surge has been aided by more equities market understanding, more money
available for investing, and the Indian market's enormous bull run. The advent of tech-
enabled discount broking platforms like Zerodha and 5paisa is the most important reason of
all. They have drastically lowered brokerage and transaction fees, making stock investment
much more accessible to the average person.

The current pandemic is the most recent factor contributing to ever-increasing retail
participation. Brokerage firms have jumped on board to capitalise on the uptick and are
rapidly gaining new clients. Trading volumes for exchanges and brokers have increased by at
least 40-50 percent as a result of increased involvement and increased volatility.

Indian Brokerage Industry: What the climate looks like going ahead?!

The majority of Indian brokerages have moved their focus to youthful clientele and are
rushing to provide them tech-focused goods.
Varsity, Zerodha's education effort, has helped them attract millennials, for example.
They're now counting on True Beacon, an asset management firm. Unlike standard mutual
funds, which impose annual management fees and an exit load (a penalty if an investor
leaves during the lock-in period), True Beacon focuses on a client-friendly methodology and
only charges a one-time 10% carry cost (fees charged on profits made at the end of the
year). In the coming years, Zerodha wants to launch an NBFC and a mutual fund. And
Zerodha isn't the only one who thinks this way.

Angel Broking's main tech offering for retail investors is ARQ, an algo-based stock
recommender. For a curated portfolio evaluation in real-time and one-click execution,
Motilal Oswal has introduced robot indicated products. Intelligent Advisory Portfolios are
also available for a fraction of the cost. Sharekhan offers quantitative model-based portfolio
management and advice services.

Also, Zerodha is affected by several macro-environmental factors. Companies such as

WazirX (acquired by Binance, the world’s largest cryptocurrency exchange) and CoinSwitch
are multiplying their number of registered users every day. Also, with the “Cryptocurrency
and Regulation of Official Digital Currency Bill, 2021” at the horizon, the Indian government
might bring in laws and regulations, leading to more people exploring the cryptocurrency
market. This may lead to more and more people diversifying their platforms, and Zerodha
may find itself competing at a small level with these cryptocurrency trading platforms for
volume soon.