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Comparison of Full Service Brokers and Discount Brokers in India

Posted on Thursday, December 11, 2014

Modified on Saturday, October 1, 2016

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[This article was first published in the November, 2014, issue of Smart Investment, The weekly investment journal.]

For years; I follow the brokerage industry very closely. Recently I came across a radical change in the India brokerage industry. This has drastically changed the trading habits of many traders and has brought down the brokerage cost significantly.

In this article I will explain about how new breeds of broker are taking the traditional brokers head on and how the broking industry in India is heading for a change.

Types of 'Retail Brokers' in Indian Stock Market

As stock market investors we all use brokers on a regular basis. Any transaction (buy & sell shares or contracts) in the stock market requires a stock broker who works like an agent between the stock exchange and investors. These brokers are registered members of the stock exchange and regulated by SEBI.

Today; the retail brokerage business model in India may be classified into 2 broad categories:

  • Full Service Brokers (Traditional Brokers)

    Traditional brokers are full service brokers offering trading (stocks, commodities and currency), research and advisory, investment banking, sales and asset management under one umbrella. They also allow investing in Forex, Mutual Funds, IPOs, FDs, Bonds and Insurance. In some cases full-service brokers also have in-house banking and demat account services.

    India has over 10,000 traditional retail brokers. They are 'advisors' for the client and at the same time salesmen for the financial products. ICICIDirect, Kotak Security, HDFC Sec, Sharekhan, MotilalOswal, India Infoline are some of the full-service brokers.

  • Discount Brokers (Budget Brokers)

    Discount brokers offer low brokerage, high speed and the state-of-the-art execution platform for trading in stocks, commodities and currency derivatives. They offer 'no-frills' brokerage service for 'do-it-yourself' traders who understand the market well. They are also known as online brokers who offer savings of 80-90% on brokerage.

    India has around 15 discount brokers including ProStocks, Zerodha, RKSV, Trade Smart Online, Achiievers, SAS online etc. While there are few discount brokers in the India stock marketand they combined to contribute around 10% of the turnover at BSE and NSE.

Brief comparison of 2 full-service and 2 discount brokers

Full-service brokers are traditionally offering personal services in the neighborhood through branches / franchise (MotilalOswal, ICICIDirect, Sharekhan etc). Discount brokers are new breed of brokers offering technologically advanced service at extremely cheap online brokerage services.

Below is the brief comparison of 2 full-service and 2 discount brokers in terms of fees, brokerage and transaction/turnover charges.

Brokers Fees

Broker Type of Broker Account Opening Fee Brokerage Account AMC Demat Account Opening Fee Demat Account AMC Trading Terminal Fee Call & Trade Charges Minimum Brokerage
ICICIDirect Full-service Rs 975 Free Free Rs 450 Rs 900/year Free Rs 35
Sharekhan Full-service Rs 750 Rs 400 Free Rs 400 Nil Free 10 paisa *
ProStocks Discount Free Free Free Free Free Rs 10 Rs 15
Zerodha Discount Rs 300 Free Rs 100 Rs 300 Free Rs 20 Nil
RKSV Discount Rs 250 Free Free Rs 300 Free Rs 20 Nil
* Sharekhan charge minimum broker of 5 to 10 paisa per share+ Rs 16 DP Charges.

Brokerage Charges

Broker NameAccount TypeEquity DeliveryEquity IntradayEquity FuturesEquity OptionsCommodityCurr FuturesCurr Options
ICICIDirectI-Secure Plan0.55%0.28%0.05% - 0.03%Rs 95 - Rs 65 / lotNA0.050% - 0.030%Rs 95 - Rs 65 / lot
SharekhanClassic Account0.50%0.10%0.10%Rs 100    
ProStocks FreeRs 15 per tradeRs 15 per tradeRs 15 per tradeNARs 15 per tradeRs 15 per trade
Zerodha FreeRs 20 per tradeRs 20 per tradeRs 20 per tradeRs 20 per tradeRs 20 per tradeRs 20 per trade
RKSVDream PlanFreeRs 20 per tradeRs 20 per tradeRs 20 per tradeRs 20 per tradeRs 20 per tradeRs 20 per trade
SAS OnlineRs 999 Equity Plan*Rs 0Rs 0Rs 0Rs 0NANANA
* SAS Online flat monthly brokerage plan offers 'unlimited trading'in Equity Cash and F&O segments.

Transaction / Turnover Charges

Broker Name Equity Delivery Equity Intraday Equity Futures Equity Options Commodity Curr Futures Curr Options
ICICIDirect NSE: 0.0031% | BSE: 0.0028% NSE: 0.0031% | BSE: 0.0028% 0.0018% 0.05% on Premium NA 0.0012% 0.05% on Premium
Sharekhan NSE 0.00325% | BSE 0.00275% NSE 0.00325% | BSE 0.00275% NSE 0.0019% | BSE 0.0005% NSE 0.05% | BSE 0.0005% MCX (Non-Agri) 0.0023% | MCX (Agri) 0.00095% NSE 0.00135% | MCX 0.00130% NSE 0.04220% | MCX 0.03220%
ProStocks NSE: 0.00325% | BSE: 0.00275% NSE: 0.00325% | BSE: 0.00275% NSE: 0.0019% | BSE: 0.0005% NSE: 0.050% | BSE: 0.0025% on premium NA NSE: 0.0011% | BSE: 0.0010% NSE: 0.040% | BSE: 0.0010%
Zerodha NSE: 0.00325% | BSE: 0.00275% NSE: 0.00325% | BSE: 0.00275% NSE: 0.0021% | BSE: 0.0007% NSE: 0.053% | BSE: 0.0027% on premium Non-Agri: 0.0031% | Agri: 0.00175% NSE: 0.00135% | MCX-SX: 0.0013% NSE: 0.044% | MCX-SX: 0.037%
RKSV 0.0035% 0.0035% 0.0021% 0.0550% 0.0026% 0.00150% 0.0600%

This comparison shows that discount brokers charges much less brokerage. Most discount brokers also do not charge minimum brokerage. Their transaction/turnover charges are lower than most traditional brokers.

Side by side comparison on parameters which matters for most traders

Let's compare full-service and discount brokers side by side on parameters which matters for most traders / investor of India's share & commodities trading market.

 Full-service BrokerDiscount Broker
Personalize Local ServicesThey have large branch/franchise network and offer personal services. In other words; they have their time and place.They have none or few branch / franchise. They are online brokers having couple of offices in metro cities.
Number of Retail BrokersThere are 10,000+ retail brokers in India. Around 500 brokers closed their shops in last 1 year. Many others have downscaled including largest 'India Infoline'.Most discount brokers started business after year 2010.Today there are around 15 discount brokers but they account for over 10% of total transaction at NSE.
Add-on ServicesThey offer research reports, personal recommendations, funding, extended margins and many other add-on services.They are online brokers focused mainly on trading. They don't offer research, funding and other add-on services.
3-in-1 accountMany offers 3-in-1 account for seamless transactions. This includes trading account, demat and bank account.Only trading account is offered. Customer has to open/use demat & bank account from other companies.
Brokerage ChargesMost brokers charge brokerage in % of total trade value. The brokerage can also be negotiated in most cases. Most full-service brokers are not transparent in terms of charges. Some broker offers prepaid plans with complex terms and conditions.They charge much reduced commission (60-80% cheaper). Most of them charge flat rate brokerage (i.e. Rs 20 per trade) irrespective to the size of the trade. Some also offer fixed monthly brokerage for unlimited trading (i.e. Rs 1,899 for unlimited equity trading).
AMCMost charges annual maintenance fee.No AMC for Trading Account.
Minimum BrokerageThey charge minimum brokerage.No minimum brokerage. Helps trading in very small quantity or in penny stocks.
Call & TradeFree with most full-service brokers.They charge additional fee for call & trade (i.e. Rs 20 per executed order).
Penny Stock TradingVery expensive as they charge minimum brokerage.Very cheap as their brokerage is like '0.01% or Rs 20/Trade whichever is lower' for equity intraday with no minimum brokerage.
Software ChargesMost of them charges extra to retail investors for using trading terminal.All trading platforms i.e. website, mobile app and trading terminals are free.
FundingMany of them offer funding for trading.No funding is available through broker.
Margin OfferedThey offer higher margin based on your personal relationship with the broker.The margin offered is standard margin which is same for all the customers.
Investment OptionsThey are active in all areas of security business including investing in Stocks, Commodities, Forex, Mutual Funds, IPOs, FDs, Bonds and Insurances.Stocks, commodities and currency derivatives trading at NSE, BSE and MCX.
Target CustomersPeople, who need help from broker giving them stock tips, manage their portfolio, seeking diversification and the right asset allocation.They are mainly for 'do-it-yourself' traders. They serve traders seeking low-cost execution.
FocusAs the brokerage market is overcrowded the traditional broker are focusing more on investor advisory as a business model.At discount brokerage; fees are kept low because they offer fewer products and keep their operational cost very low. The business model is built on having an effective system and quality service in order to put through the most volume.

By now you may have got a good idea of how discount brokers are different from full-service brokers. Let's talk about the myths and doubts most traders have about discount brokers. Here I will try to clarify few doubts many traders have about discount brokers.

Myths about Discount Brokers in India

Introduction of the electronic trading made radical changes in the Indian stock market. It increased trading volume and liquidity, slashed the cost of intermediation and broadened access to markets.

To leverage the changing brokerage industry; in 2010 a new kind of brokers (discount brokers) entered in the market. Their business model was different from traditional brokers offering personalize service to lakhs of stock/commodity market investors and at the same time charge significant fees.

The discount brokers were built on philosophy of leveraging technology to empower customers by providing them the best pricing, customer service, and tools they need to make profits. Here are few of the myths or doubts explained about discount brokers:

 Discount Broker
Trustworthiness / ReliabilityThey are equally reliable as traditional brokers. They are registered with the stock exchanges (BSE, NSE and MCX) and regulated by SEBI. They are regularly audited by the exchanges.
Your money and shares are as safe as with them as with any other popular traditional share broker in your neighborhood.
Customer ServiceDespite their low brokerage; they offer excellent customer service.
Do they make enough money to offer good service?Yes, they make enough money to offer excellent customer service.
While discount Brokers have very skinny profit margin; they believe in low cost online execution. Their operational cost is much lower in comparison to traditional brokers. Their customer acquisition cost is also low as they do not spend much money in advertisement.
Trading Services OfferedMost discount broker offers trading service in stock, commodity and currency derivative segments across all popular stock exchanges. Because they focus only on trading; they are specialized to meet the need of traders.
Hidden FeesDiscount brokers are most transparent brokers. There are no hidden charges. Their software's are free; including trading terminal, mobile app and website. There is no AMC for trading account. The calculation of brokerage is very easy. They do charge extra for call & trade to discourage customers to use this service.
Automated TradingMost discount brokers offer Alog trading (semi-automated or fully-automated). With the very low brokerage; it's possible to trade frequently with shorter break-even point to make profits.
Popular SegmentF&O trading segment accounts for most trading in India and also for the discount brokers.
Number of CustomersOver 2 lakh traders moved in last 3 years to discount brokers and the growth is exponential. They have relatively higher number of active clients than full-service brokers. They are growing at 50-60% every year.

Discount brokers are no more the buzz in the town; they offer real value to many frequent traders. They are changing the dynamics of brokerage industry with technologically advance trading platforms, online investor education and cheapest brokerage charges. Most traditional brokers (i.e. Sharekhan, India Infoline) are in the brokerage business for decades and we know lot more about them.

Top Discount Brokers in India Share & Commodity Trading Market

So far we did talk about full-service and discount brokers in general. Now I will discuss about few popular discount brokers in India and what do they offer for traders like you.

Most traditional brokers (i.e. Sharekhan, Motilal Oswal) are in the brokerage business for decades and we know lot more about them.

The availability of high speed internet, increased use of computers and customer long term desire to reduce the brokerage build a market for discount brokers who opened their shops in India in year 2010. Since then few lakh traders are already moved from traditional brokers to flat fee discount brokers.

Today there are around 15 discount brokers in India including ProStocks, Zerodha, RKSV, Trade Smart Online, Compositedge, Traderjini, Bezel etc. Some of the most popular discount brokers are:

ProStocks, Cheapest Stock Broker in India

ProStocks Logo

ProStocks, a Mumbai based online stock broker is among the popular online broker offering low cost brokerage services. ProStocks offer stock and currency derivatives trading at BSE and NSE.

It has 2 pricing plans:

  • Monthly Unlimited Trading Plan - Rs 899/Month for unlimited Equity and Equity F&O trading in an exchange Or Rs 499/Month for unlimited Currency F&O Trading.
  • Flat Rate Trading - Rs 15 per trade in any exchange, any segment or any size trade.

Key features:

  • Zero PCM Fee. Lowest Transaction Charges.
  • Zero AMC Demat Account with Rs 1000 one time deposit.
  • Lowest call&trade charges - Rs 10 per executed order.
  • All software's are free including trading terminal, website and mobile app.
  • No hidden charges
  • No minimum brokerage. No prepaid plans.
  • Offer referral program which allows you to refer friends and earn 10% of brokerage they pay.

Zerodha, Pioneer of India Discount Brokerage

Zerodha Logo

Incorporated in 2010; Zerodha, a Bangalore based broker was the first broker to offer discount brokerage services to retail investors in India. In short span of 3+ years, Zerodha contributes to over 2% (Rs4 to 6k Cr) of the NSE total turnover. This is a significant volume in the market where there are 10,000+ brokers.

Zerodha offer stocks, commodities and currency derivatives trading at BSE, NSE and MCX.

It has one simplest pricing model:

  • Equity Intraday, F&O, Currency F&O, Commodity Brokerage: 0.01% or Rs 20 per trade whichever is lower
  • Equity Delivery Brokerage: 0.10% or Rs 20 per trade whichever is lower

Key features:

  • All software's are free including trading terminal, website and mobile app.
  • No hidden charges (except Rs 20 charge for per executed order when orders are placed through call & trade.)
  • No minimum brokerage. No prepaid plans.
  • Offer referral program which allows you to refer friends and earn 10% of brokerage they pay.
  • Offer 'Bracket Orders' with an option of 'Trailing Stop loss' for both Equity and F&O.

RKSV [UpStox], the Discount Broker

RKSV Logo

RKSV (or UpStox), a Mumbai based discount broker entered in to retail brokerage business in early 2012 with goal to significantly reduce the cost of trading in India for retail traders by offering low-cost brokerage services. RKSV is among the top discount broker.

Brokerage plans offered:

  1. The Dream Plan - Flat Rs 20 per trade

Key features:

  • No minimum brokerage. This makes it easy to trade in penny stocks or in small quantity.
  • No hidden charges. (Except Rs 20 charge for per executed order when orders are placed through call & trade).
  • RKSV offers referral benefit of 10% of brokerage from customers you refer.
  • RKSV offers cover orders and bracket orders.
  • Opening demat account is optional.
  • All software's are free including trading terminal, website and mobile app. They use OMNESYS NEST trading platform.

Trade Smart Online

Trade Smart Logo

Trade Smart Online (TSO) is a Mumbai based discount brokerage firm offering low cost unlimited trading plans. TSO is an initiative by VNS Finance & Capital Services Ltd, a full-service broker since 1994.

Brokerage plans offered:

  1. Flat Fee Brokerage Plan (Trade @ Rs 15) - Flat Rs 15 per trade
  2. Trade @ 0.7 Paisa - Equity(Intraday, F&O), Commodities and Currency Derivative trading at 0.007%, Equity delivery 0.07% and Options at Rs 7 per lot.
  3. Unlimited Trading Plans (Fixed monthly fees for unlimited trades)
    • Rs 3999 Plan - Unlimited trading in Equity Cash and F&O segments.
    • Rs 1999 Plan - Unlimited trading in NSE Currency F&O segments.
    • Rs 3999 Plan - Unlimited trading in MCX Commodity Futures segment.

Key features:

  • TSO offer more variant of brokerage plans than any other discount brokers. They also offer flexibility to switch the plans anytime.
  • They have their own depository services. This is unlike most other discount brokers in India. This helps in quick account opening (2 days) and seamless transaction of shares between trading and demat account.
  • Unlike most discount brokers, they charge minimum brokerage of Rs 15 per trade.
  • They charge Rs 20 for per executed order when orders are placed through call & trade.
  • TSO offers referral benefit of 10% of brokerage from customers you referred.
  • Trading Platforms - Equity & Currency - NSE's NOW, Commodity - OMNESYS NEST. All software's are free including trading terminal, website and mobile app.

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User Comment

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9. Veeramalai Karuppiah  Mar 18, 2017 8:20:46 AM IST Reply
Deaf sir, I am new and want invest Share for long term which broker is good for long term, either I go with full service brokers or discount brokers?, thanks
avatar
8. Abhishek  Jul 31, 2016 4:05:05 PM IST Reply
Hello sir,

I''m a beginner. I will start trading with 10000. So
I want to know that out of two which is best to start with... Discount brokers or full service broker..
avatar
7. comet star kyndiah  Jul 21, 2016 6:30:44 PM IST Reply
Explain me the meaning of " do it yourself traders " whether "Intraday trader" is in otherwords a " do it yourself traders and all decision are to be taken by him and the broker will not guide him at any sphere ?
avatar
7.1. Mukesh kothari  Jul 23, 2016 3:17:11 AM IST
Hi comet star kyndiah,

Traditionally the stock trading is done by visiting the broker office (sub broker or branch) or calling them to place the orders. The broker has trading terminals where dealers places customer orders.

Next generation brokers offers you the free software (mobile app, website and trading terminal) and expect you to place the order by yourself, without visiting office or calling a dealer.

From ''do-it-yourself'' traders or investors, I mean people who are equipped and can place order by themselves through the trading platform provided by the broker.

Mukesh Kothari
avatar
6. Kalpesh  May 11, 2016 6:33:46 AM IST Reply
If I''m trading frequently but with very low amounts I.e. as low as 5000 max, I feel full service brokerage will b less per transaction. Am I thinking in right direction?
avatar
6.1. Mukesh kothari  May 25, 2016 8:25:26 AM IST
Hi Kalpesh,

Note that full service broker charges minimum brokerage which makes it almost senseless to trade in small quantity with them.

Discount brokers doesn''t have any minimum brokerage and that''s the reason they are best to trade with.

Mukesh Kothari
avatar
5. Karthik  Jan 31, 2016 6:33:11 PM IST Reply
Who are the discount brokers providing bracket orders in mobile app as well??
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4. ram  May 12, 2015 12:44:41 AM IST Reply
any good discount broker offering IPO services as well otherwise how to apply for IPO if we opt for a discount broker can anyody plz explain
thank you
avatar
4.1. Mukesh kothari  Apr 12, 2016 2:10:30 AM IST
Hi Ram,

Sorry to say but none of the discount brokers offer IPO''s.

But please note:



Under ASBA facility for applying IPO''s, investors can apply in any public/ rights issues by using their bank account. Investor submits the ASBA form (available to downat BSE and NSE website or at the designated branches of the banks acting as SCSB) after filling the details like name of the applicant, PAN number, demat account number, bid quantity, bid price and other relevant details, to their banking branch by giving an instruction to block the amount in their account. In turn, the bank will upthe details of the application in the bidding platform. Investors shall ensure that the details that are filled in the ASBA form are correct otherwise the form is liable to be rejected.

-


I understand that it so easy to applying in IPO''s though your broker online (i.e. many of us used ICICIDirect for years to do so).

It requires for a broker to be the distributors of the IPO''s. Broker get a small amount commission based on the applications submitted through them which have been considered eligible for the purpose of allotment. The commission is so low that the discount brokers do not see any financial benefits in becoming the distributor of IPO shares.

But I expect few top discount brokers will eventually do that to make the customers happy.

Many stock market investors who have account with the discount broker are still holding the account with the full-service brokers for services like this.

Hope this help.

Mukesh Kothari
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3. Chittorgarh.com Team  Apr 30, 2015 5:50:05 AM IST Reply
@ Manish,

Yes, with RKSV or Zerodha you can huge amount of brokerage. Here is one example:

If you trade for Rs 1 lakhs (Buy 1000 share of Rs 100 ) at Sharekhan, you pay 1,00,000 * 0.10% = Rs 100 Brokerage. The same trade will cost you Rs 20 with RKSV or Zerodha.

Also with flat brokerage its very easy to calculate the brokerage.
avatar
2. Manish  Apr 30, 2015 5:48:34 AM IST Reply
My tradig A/c with Sharekhan 10 paise brokerage. Is it usefull to me to open A/c with Zeerodha or RKSV? Please guide me. Thanks.
avatar
1. Dineshraj  Dec 27, 2014 2:18:55 AM IST Reply
Discount brokers are the way to go for all traders. I used Sharekhan and Indiabulls both. After moving to zerodha I realized that I was actually making money for Sharekhan while trading with them not for me.
avatar
10.1. Joseph  Jul 30, 2016 10:12:07 PM IST
100% correct ( with any full service broker)
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