India Brokerage

Sector outlook

Piran Engineer More of the same

piran.engineer@clsa.com Cash equity volumes remain subdued
+91 22 6650 5006
Discount brokers continue to be at an advantage given that F&O volumes are
Shreya Shivani scaling new heights while cash volumes have been range bound for the past three
+91 22 6650 5056 years. F&O volumes/number of derivative contracts were up 3%/5% MoM for Jan-
Adarsh Parasrampuria 23, while cash volumes were at the lower end of the Rs10-17tn range that has
+91 22 6650 5057 been maintained since the onset of Covid. The industry’s NSE active clients has
Mohit Surana now declined for an eighth straight month, while the top 3 brokers (Zerodha,
+91 22 6650 5037 Groww and Angel) continue to gain market share, at 47% in Jan-23 vs 38% in Apr-
22. ICICI Securities had another weak month, with NSE active clients declining by
16 February 2023 108k in Jan-23 vs a 110-150k MoM decline each month since Oct-22.
F&O volumes – stable at peak
India Jan-23 was another peak for derivative volumes at Rs4245tn, which is 2% higher
Financial services than the previous peak of Rs4177tn in Dec-22. The advantage to discount brokers
continues, with F&O volumes achieving new heights while cash volumes remain
Our recent reports range bound. The number of derivative contracts was up 5% MoM, driving the bulk
of the volume growth, while the Nifty and Bank Nifty saw choppy/declining trends
in the past month.
Cash volumes at lower end of the range
Cash volumes have remained range bound at Rs10-17tn since the onset of Covid.
For Jan-23, cash volumes were at the lower end of this range at Rs10.9tn and were
lower than Dec-22 levels, which is contrary to the historical trend. It is interesting
to note that while both NSE and BSE cash equity turnover declined MoM, NSE’s
share inched up to 93.7%. The margin trade finance (MTF) book remains at peak
levels but was largely flat MoM. In Dec-22 and Jan-23, the MTF book has touched
a new peak that is 3% higher than Apr-22 (earlier peak).
Top 3 brokers gaining market share in NSE active clients
For the eighth consecutive month, the number of NSE active clients for the industry
has declined, while the market share of the top 3 brokers has consistently grown
during this period. ICICI Securities’ NSE active clients have been declining since
Jul-22 and its market share is now down 73bps from Apr-22 levels. Zerodha, Angel
and Groww have gained 180-430bps market share from Apr-22 to now. Over 2.2m
new demat accounts were opened in Jan-23, similar to Dec-22, and total demat
accounts has now crossed 110m.

Cash equity volumes declined both on a MoM and YoY basis in Jan-23

www.clsa.com Source: NSE, CLSA. Note: Top 3 brokers are Zerodha, Angel and Groww

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 More of the same India Brokerage

Figure 1

Share of delivery volumes in Share of delivery volume (%)

Dec-22 was up 50bps MoM

Source: NSE, BSE

Figure 2

NSE’s market share has Share of cash equity trading volumes (%)
inched up to close to 94%

Source: NSE, BSE

Figure 3

Share of retail and other Cash trading mix by type of investor (%)
investors at average levels
of 51%

Source: CLSA, SEBI

Find CLSA research on Bloomberg, Thomson Reuters, FactSet and CapitalIQ - and profit from our evalu@tor proprietary database at clsa.com

16 February 2023 piran.engineer@clsa.com 2

 More of the same India Brokerage

Figure 4

The margin trade finance Industry’s MTF book trend

book for the industry is at
an all-time high

Source: NSE, BSE

Figure 5

F&O volumes on a strong Derivative volume up 11x versus pre-Covid levels while cash volume up only 30%
run

Source: NSE, BSE, CLSA. Note: We have assumed Jan-20 as a base.

Figure 6

Derivatives volumes at yet Derivatives volume up 2% MoM to an all-time high

another peak

Source: NSE

16 February 2023 piran.engineer@clsa.com 3

 More of the same India Brokerage

Figure 7

4bn+ F&O contracts traded No. of derivative contracts also growing at a strong pace
in Dec-22 and Jan-23

Source: NSE

Figure 8 Figure 9

While Nifty and Bank Nifty have declined MoM, the F&O volumes continue to move up

Source: BBG, NSE, CLSA Source: BBG, NSE, CLSA

Figure 10 Figure 11

Number of demat accounts for the industry New demat account openings stable

Source: CDSL, NSDL Source: CDSL, NSDL

16 February 2023 piran.engineer@clsa.com 4

 More of the same India Brokerage

Figure 12

Eight straight months of Industry NSE active client base down 3% MoM
decline in the NSE active
customer base

Source: NSE

Figure 13

Number of active NSE clients – ISEC, Upstox and Zerodha see MoM decline

Source: NSE

16 February 2023 piran.engineer@clsa.com 5

 More of the same India Brokerage

Figure 14

Zerodha’s market share is Market share in NSE active clients (%)

up 180bp from Apr-22,
while Groww has gained
430bps market share

Source: NSE
Figure 15

Another weak month for Addition to NSE active client base

ISEC. Angel also loses NSE
active clients

Source: NSE, CLSA Note: Units in ‘000.

Figure 16

Top 3 brokers’ market share Top 3 brokers (Zerodha, Groww and Angel) gaining market share
at 47% vs 38% in Apr-22

Source: NSE, CLSA

16 February 2023 piran.engineer@clsa.com 6

 Important disclosures India Brokerage

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Companies mentioned
Angel Broking Limited (N-R)
Groww (N-R)
ICICI Securities (ISEC IN - RS474.0 - U-PF)
Upstox (N-R)
Zerodha (N-R)

Analyst certification
The analyst(s) of this report hereby certify that the views expressed in this research report accurately reflect my/our
own personal views about the securities and/or the issuers and that no part of my/our compensation was, is, or will
be directly or indirectly related to the specific recommendation or views contained in this research report.

Important disclosures
Recommendation history of ICICI Securities Ltd ISEC IN

Date Rec Target Date Rec Target

20 Jan 2023 U-PF 540.00 21 Jul 2021 BUY 925.00
21 Oct 2022 U-PF 530.00 22 Apr 2021 BUY 575.00
05 Jul 2022 U-PF 450.00 26 Jan 2021 BUY 540.00
21 Apr 2022 O-PF 720.00 23 Jul 2020 BUY 625.00
23 Mar 2022 O-PF 750.00 08 May 2020 BUY 450.00
20 Oct 2021 O-PF 950.00
Source: CLSA

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 Important disclosures India Brokerage

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