Brokers have discovered a golden opportunity in the positive market sentiment to add investor accounts, even if it means offering these services for free.
A lot of broking agencies are going all out to woo retail investors by offering free demat and trading accounts. While some of them are not charging customers for account opening, except for the margin money, others have made these accounts lifetime-free from recurring and maintenance charges.
This includes players such as Way2Wealth, India Infoline, Anand Rathi, Nirmal Bang and Indiabulls Securities. India Infoline does charge customers Rs 555 as account opening fees; however, it does not take any annual maintenance charges. “We have seen a significant uptick in account opening requests in the last few months. Investors believe the worst is behind us and a lot of them are moving from conventional investments like bank FDs (fixed deposits) to equity markets,” said Harshad Apte, Vice President-Strategy, at India Infoline.
Experts say the strategy pays off well in smaller towns, where broking agencies open new branches. “For getting clients in those towns and making them aware of the equity culture, it becomes important to offer some freebies which can attract them to investing in markets. It has worked for us because retail investors believe in these small discounts for taking investment decisions,” said the managing director at a broking house.
Way2Wealth is offering a free demat and trading account, with a margin money of Rs 10,000 during the account opening. “Without the margin money, chances of the account getting active are much less. Many people have a demat account just for the sake of having it and it becomes dormant afterwards. To ensure the customer actively engages in equity trading, we have introduced the concept of margin money. We lose about Rs 2,000 on unoperational accounts, so it becomes necessary that we have serious customers,” said Shahi Bhushan, the company’s CEO, Stock Broking.
Though Angel Broking has not done a blanket waiver of account opening charges, it has done so for select customers such as HNIs (high net worth individuals) and ultra HNIs.
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On the online platform, many brokers have reduced transaction charges for customers who bring in high volumes — that is, the more you trade, the lesser you pay. Reliance Money in 2008 had launched a flat fee structure of Rs 500 for trading up to Rs 1 crore.
Indiabulls Securities, too, does not charge annual maintenance charges from its customers. “Free trading accounts are just a kicker. At the end of the day, an investor looks at the quality of services that the broker is offering to take an investment decision”, said Divyesh Shah, CEO.
India Infoline is adding more than 3,000 accounts every month. Similarly, Angel Broking is adding close to 17,000 accounts every month. According to the company, it has witnessed a growth of 36 per cent in the number of demat accounts in the past few months. Way2Wealth is also adding 3,000 accounts on an ongoing basis every month.According to figures from NSDL (National Securities Depository Ltd) and CDSL (Central Depository Services Ltd), they have together opened 1.5 million accounts in the past one year.
Experts say the surge in number of accounts has come mainly due to the primary market revival. Many first-time investors get into the equity market through IPOs (initial public offerings).
Although retail subscriptions to IPOs last year were not substantial, brokers say it will pick up in days to come. And, with a number of PSU offers lined up, investors will be taking a plunge into equities.