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IndiaInfoline Winding up Retail Broking

IndiaInfoline Winding up Retail Broking

IIFL

Landscape of retail broking in absence of these pioneers? 

 

Traders,

Indiainfoline, India’s largest retail brokerage firm announcing its decision to wind up retail broking has come as a shocker on the back of the recent announcement from HSBC shutting down their retail brokerage business after buying it form IL&FS a few years ago. Indiabulls, over the last few years, has also moved its focus completely away from retail broking.

IL&FS Investmart was among the first to make internet trading popular in India followed by Indiabulls and Indiainfoline who took it to the masses and built a vast business empire from the retail broking revenue. Knowing that these pioneers of retail broking in India would probably not be competitors in the near future will make the landscape of retail broking very interesting.

The recent announcements also probably explain the reason for a status quo in terms of technological advancement in the retail broking space over the last many years, the big brokerages of the past are no more looking at the retail business as their primary source of revenue and have completely stopped expenditure on R&D, technology or offering innovative products. When we decided to start Zerodha over 4 years back, we had 2 reasons:

1. Firstly, we knew that the way Indian brokerages were pricing was outdated and not in sync with how it was in the developed markets. If, in an online environment, the cost of executing a trade doesn’t go up with the size of the trade, then why should the charges go up? Hence we started the business charging only Rs. 20 per executed order irrespective of the size of order. This way of pricing is also called discount broking. 

2. Secondly and more importantly, we realized that other than probably Indiabulls/Indiainfoline/Sharekhan putting up online platforms in the early 2000′s, there has been no innovation in terms of tools or platforms that traders in India have access to. Traders in most developed markets are a lot more professional but the reason is because they have access to those professional tools which give them an important edge to win. Using Technical Analysis while trading improves the odds of winning significantly, mainly because most indicators would never let you go against the trend – the biggest reason for traders to lose money in the markets. Though Technical Analysis is sworn by professional traders across the world, none of the platforms in India can help you for example write and backtest strategies before going live on multiple strategies to diversify your risk and also increase the odds of winning. This is one of those chicken and egg situations, since platforms don’t give you an option to do so, most people in India don’t know or follow backtesting before putting money on their strategy.

We knew that reducing pricing was simple, but being able to spend on technology and R&D especially more because we were a boostrapped startup would be a challenge. Over the last 3+ years, we have focussed on making this business profitable and building a warchest to achieve the primary goal of starting Zerodha, helping traders win. Just reducing pricing will increase the odds of winning marginally and we know that the real contribution from our side would be when we provide a trading environment which will compell the retail trading community to get a lot more professional in trading and hence increase the odds of winning significantly. I keep getting questions on why we as Zerodha don’t advertise, the reason is because we presently want to focus on getting our traders win and we rather spend our energy and resources towards that.
The retail broking landscape is changing fast in India and Zerodha today has the momentum and your support to lead this business and pioneer a new era in retail broking, not just in terms of pricing but technology and products. We are also looking for contributors who are proficient in various aspects of trading the markets and having the same vision of greater good to the community to help us get there, if you are interested to associate do send a brief out to nithin@zerodha.com.
Hoping for a bright future for all traders in India,
Happy Trading,

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