India's Top Brokers in Crisis: Revenue Plummets, Investors Flee! What's Next?

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AuthorAnanya Iyer|Published at:
India's Top Brokers in Crisis: Revenue Plummets, Investors Flee! What's Next?
Overview

India's leading brokerage houses faced a challenging year in 2025, losing 35 lakh active investors due to new restrictions on futures and options (F&O) trading and prolonged market underperformance. Major players like Zerodha, Angel One, and Groww reported significant revenue declines. In response, brokerages are aggressively diversifying into wealth management, lending, and asset management, shifting focus from trading to long-term wealth creation. Despite trading moderation, overall market participation deepened, with a record 18.75 percent retail holding in NSE and SIP accounts crossing 100 million.

Brokerages Navigate a Year of Reset

India's financial landscape witnessed a significant 'year of reset' for brokerage houses in 2025. Regulatory shifts and market underperformance forced top firms to confront declining revenues and a notable outflow of active investors, prompting a strategic pivot towards diversified financial services.

The Core Issue

Multiple regulatory changes enacted by the Securities and Exchange Board of India (SEBI) directly impacted brokerage operations. These included an increase in Securities Transaction Tax (STT) for F&O trades, a reduction in weekly expiries to two contracts, adjustments to Basic Services Demat Account (BSDA) limits, the elimination of volume-based rebates on transaction charges, and higher margin requirements for certain options strategies. Compounding these regulatory pressures was a prolonged phase of market underperformance and lower returns starting in October 2024, which dampened investor interest in equities.

Financial Implications

The cumulative impact was substantial. The top four brokers collectively lost approximately 35 lakh active investors. Zerodha, the country's largest broker by revenue, saw its revenue decline by 30 percent in the June quarter, according to founder Nithin Kamath. Angel One reported a revenue drop of around 12 percent in the first quarter of FY26. Groww, a leading platform by active investors, also experienced a 9 percent decline in revenue during the same period. Publicly available data for listed companies mirrored this trend for the second quarter, though Zerodha's specific figures remain private.

Market Reaction and Investor Behaviour

Despite short-term revenue impacts, industry leaders view these changes as a 'structural reset' fostering a healthier and more resilient market ecosystem. Harsh Jain, founder and COO of Groww, noted that the tightening of F&O regulations, while affecting short-term revenues, has materially improved the market. Even amidst foreign investor withdrawals, domestic retail investment remained robust. By the second quarter of FY26, individual investors held 18.75 percent of the NSE market value, a high not seen in 22 years. Amit Majumdar, group chief strategy officer at Angel One, observed a defining shift towards long-term wealth creation, with investors demonstrating resilience during volatility.

Wealth Creation and Market Breadth

The overall market participation deepened, driven by long-term investment goals. The total number of unique investors on the NSE surpassed the 12-crore mark. Retail assets under management across equities and mutual funds grew steadily. Notably, Systematic Investment Plan (SIP) assets grew 17 percent from ₹2.6 lakh crore to ₹3 lakh crore between the end of 2024 and November. SIP accounts alone crossed 100 million, a significant increase from around 75 million at the end of 2024. The surge in IPOs, especially from new-age tech companies, has broadened market participation beyond traditional names.

Consolidation in Favour of Top Brokers

A clear trend emerged with market share consolidating in favour of the top three brokerages: Groww, Zerodha, and Angel One. These firms saw their market share improve across key metrics like total assets under management and daily transactions. Groww's market share in new SIP account openings rose to about 45 percent, and its share of active NSE investors grew to 26 percent.

Diversification Strategy

The significant lesson from 2025 was the risk of over-reliance on derivatives revenue. Brokerages accelerated diversification across asset classes and financial services. Groww identified the margin trading facility (MTF) as a key growth driver. Fixed-income investing also saw substantial growth, with retail bond investments more than doubling. Brokerages are evolving from being transaction-led to becoming full-stack financial partners, offering comprehensive wealth products. Zerodha AMCs manage assets worth ₹8,000 crore, while Groww's AMC crossed ₹3,000 crore in less than two years.

Future Outlook

Looking ahead to 2026, brokerages express measured optimism. Angel One anticipates regulations becoming growth enablers, with wealthtech and insurtech becoming more personalized. Zerodha plans incremental improvements, new offerings like FDs on Coin, US stocks, and integrating Ditto insurance. Groww envisions a product-led phase focusing on regulated algo trading, REITs, InVITs, bonds, and technology-led wealth advisory services. The focus remains on platforms that anticipate the shift towards informed, diversified, and disciplined retail investors.

Impact

This structural shift by brokerage houses can lead to a more stable and diversified Indian stock market. Investors benefit from a broader range of financial products and services aimed at long-term wealth creation rather than speculative trading. Brokerages face pressure to innovate and enhance customer-centric offerings, potentially leading to a healthier competitive landscape. This trend is highly relevant for investors seeking comprehensive financial solutions and for the overall evolution of India's capital markets.
Impact Rating: 8/10

Difficult Terms Explained

  • Futures and Options (F&O): These are derivative contracts whose value is derived from an underlying asset. They are complex financial instruments often used for speculation or hedging.
  • Securities Transaction Tax (STT): A tax levied on the value of securities traded on a stock exchange in India.
  • Basic Services Demat Account (BSDA): A type of Demat account with relaxed charges and lower limits, typically for smaller investors.
  • Systematic Investment Plan (SIP): A method of investing a fixed sum of money at regular intervals, usually monthly, into mutual funds or other investment schemes.
  • Margin Trading Facility (MTF): A service offered by brokers allowing investors to trade with borrowed funds, effectively increasing their trading capital.
  • REITs (Real Estate Investment Trusts): Companies that own, operate, or finance income-generating real estate. They allow individuals to invest in large-scale real estate portfolios.
  • InVITs (Infrastructure Investment Trusts): Similar to REITs but focused on infrastructure assets like roads, power transmission lines, and ports.
  • NPS (National Pension System): A government-backed retirement savings scheme in India.
Disclaimer:This content is for educational and informational purposes only and does not constitute investment, financial, or trading advice, nor a recommendation to buy or sell any securities. Readers should consult a SEBI-registered advisor before making investment decisions, as markets involve risk and past performance does not guarantee future results. The publisher and authors accept no liability for any losses. Some content may be AI-generated and may contain errors; accuracy and completeness are not guaranteed. Views expressed do not reflect the publication’s editorial stance.