Whalesbook
Digital Platforms Drive Broking Sector Growth
India's retail broking sector continued its expansion in February 2026, adding over 3.5 lakh active users to reach a total of 4.54 crore. This growth highlights ongoing savings' shift towards financial assets and the increasing popularity of digital investment platforms. The market is shaped by two key trends: the strong presence of established digital brokers and the rapid market share gains by emerging players.
Groww Leads User Gains, Dhan Reaches 1 Million
Groww led new client acquisition again, onboarding roughly 2.65 lakh users in February. This growth pushed its total client base to about 1.27 crore, securing a 28.03% market share according to National Stock Exchange data. Dhan also reached a key milestone, crossing one million users after adding 19,000 clients last month. This represents a fast rise for the newer platform, which recently achieved unicorn status.
Market Leaders Pull Ahead as Competition Heats Up
Other established players like Zerodha and Angel One added over 10,000 clients each, though their growth was more moderate. Zerodha's user base reached 68.72 lakh (15.11% market share), showing a recovery. Angel One added clients to reach 36.93 million, a 20.8% year-on-year rise. In contrast, Upstox continued to lose users, shedding over 27,000 accounts and falling to 4.42% market share. This highlights growing pressure on mid-tier firms. Traditional players such as ICICI Securities, SBI Securities, and Kotak Securities saw smaller gains, adding around 30,000, 16,400, and 9,500 accounts respectively. Paytm added about 9,700 accounts, while HDFC Securities and Motilal Oswal reported client losses.
Valuation Gaps Emerge as Sector Faces Challenges
This performance difference is also seen in market valuations. Digital brokers often trade at higher multiples. Groww, for example, had a P/E of 52.93 as of March 2026, much higher than ICICI Securities' P/E of around 13-15. Angel One's P/E ranges from 19.19 to 31.96. This valuation gap suggests investors favor the growth potential of digital-native models. However, the sector faces challenges. A contraction in active users occurred in February 2025, and regulatory actions, like SEBI's measures on derivatives trading from November 2024 to April 2025, have reduced activity and revenue for some brokers. A Union Budget increase in Securities Transaction Tax (STT) on futures also risks impacting trading volumes and broker earnings.
Risks Loom: Sustainability and Regulatory Scrutiny
While user growth is strong, especially among digital leaders, underlying vulnerabilities exist. High market share concentration with players like Groww (28.03%) creates a tough environment for smaller firms. Upstox's decline shows that technology alone isn't enough; customer retention and adapting to trading shifts are vital. Regulatory changes remain a key risk. Past STT hikes and derivatives rule changes have already impacted the industry. Further tightening of derivatives rules or transaction costs could heavily affect brokers reliant on trading volume. The sector's reliance on speculative trading, particularly in derivatives, makes revenues vulnerable to market cycles and policy changes. FPI outflows in February 2026, despite DII support, highlight market sensitivity to global risk appetite, which can reduce trading and brokerage revenues.
Outlook: Cautious Optimism Amid Market Shifts
Looking ahead, analysts hold cautious optimism for Indian equity markets in 2026. Some, like HSBC Asset Management, are constructive, expecting FII investor returns driven by earnings growth and trade deals. The financial services sector is viewed as a key growth driver, with expectations for credit expansion and deeper markets in an innovation-friendly environment. However, the broking industry must adapt. Technological strength needs to be combined with strong risk management and flexibility for regulatory shifts. The premium for digital players signals investor interest in growth fintech models, but long-term success will depend on managing costs, retaining users, and adapting to evolving market participation amid regulatory changes.