For a penny less

SPECIAL REPORT

With the Sensex close to 12K, it is not a good idea to waste time looking for a broker. Here is where you should go.

Thanks to booming markets and changing investment perceptions, the broking business is growing leaps and bounds. It is one of those businesses that has truly evolved. Gone are the days when you had to rely on a 'tip' passed on by an around-the-corner, shady sub-broker.

Today's brokers, in their corporatised avtaar give 'recommendations' backed by diligent research. Sensing the opportunities in the market, several big brokers are getting aggressive in the retail segment. More the offerers, more the offerings. Well, it may seem so but, does it really happen that way?

Not really, if we scan through the various products and schemes brokerage houses are offering. Leaving aside one or two attempts to differentiate against competition broking houses are offering the same thing with different names.

However, different firms charge different rates depending on transaction volumes. You could thus save on transaction costs by choosing the most cost-effective firm based on your frequency and volume of transactions.

That apart, what makes one broker score over the other is the success rate of recommendations and peripheral services offered. As far as the success rate goes, you would get a sense of it only after transacting with the entity for a while.

And in case of peripheral services, in a bid to keep pace with competition, there is not much disparity with regard to what you are offered. There are just a few (extra) services that really stand out.

For instance, Emkay Share and Stock Brokers arranges for conference calls for all its clients twice everyday - in the morning based on fundamentals and in the afternoon based on technicals.

With technology having scaled up, many are offering online trading facilities and that too at the same brokerage. In fact, broking houses like ICICI-Direct offer only online trading.

But the starting point as such to take you to a broker is apparently the rates he is willing to offer you.

We checked out schemes offered by some of the big brokers with respect to the brokerage they charge.

The structure of Kotak's scheme suggests that it is aimed at big time traders. A newly launched scheme "Kotak Flat" charges a flat rate rather than a percentage of the transaction amount. There are two variants of this scheme. Customers are charged a flat Rs 9 or Rs 20 depending on the variant selected. 
 

KOTAK @499
	Variant 1	Variant 2
Monthly fees	Rs 499	Nil
Brokerage	Rs 9	Rs 20
Per trade of:
Rs 5,000 for delivery
Rs 50,000 for cash square-up/derivatives
Max exposure against margin Rs 9 Lakh

If the Rs 9 variant is selected, you have to pay a monthly fee of Rs 499. "There are a lot of investors who do not require our advice, which reduces our cost,"says D Kannan, executive director, Kotak Securities. These cost savings are passed on to the customer.

But Rs 9 is charged only for trades up to Rs 5,000 for delivery-based transactions and up to Rs 50,000 for intra-day transactions. Thus for every rupee transacted, Rs 0.18 or 0.18 per cent is charged. Another Rs 9 is charged if this slab is exceeded.

There is also a monthly charge of Rs 499. Considering an average rate of 40 paise brokerage that most other brokers charge, this monthly charge of Rs 499 will be recovered when you transact stocks worth Rs 1.25 lakh in a month.

This looks fairly attractive for traders looking for no other frills. All the peripheral services come at a cost in this scheme unlike the case with other regular schemes offered by Kotak.

On the contrary, schemes from HDFC Securities and ICICI-Direct seem to be aimed at smaller investors and are structured accordingly. They too want to reward volumes but only at the end of a quarter.
 

FEE FOR ALL
Delivery (%)	HDFC securities	ICICI- direct
Above Rs 4 cr	0.25	0.25
Rs 2-4 cr	0.30	0.30
Rs 1-2 cr	0.35	0.35
Rs 50 lakh - Rs 1 cr	0.45	0.45
Rs 25-50 lakh	0.50	0.55
Rs 10-25 lakh	0.50	0.70
Less than Rs 10 lakh	0.50	0.75
Intra Day & Derivatives (Volumes per month )
Above Rs 20 cr	0.03	0.03
Rs 10-20 cr	0.035	0.035
Rs 5-10 cr	0.04	0.04
Rs 2-5 cr	0.05	0.05
Rs 50 lakh - Rs 2 cr	0.07	0.075
Less than Rs 50 lakh	0.10	0.10
	Motilal Oswal	India Infoline
Delivery	0.4	0.25-0.50
Intra Day	0.075	0.05-0.10
Derivatives	0.03-0.10

  0.05-0.10   Both ICICI-Direct and HDFC Securities charge an upfront brokerage on whatever you transact. At the end of the quarter, depending on the volumes achieved, customers get a rebate based on the total value transacted.   For example, for every transaction you do, HDFC Securities will charge you 0.50 per cent upfront. If at the end of the quarter, the value of your transactions totals up to Rs 1 cr (that's a daily average of about Rs 1.33 lakh) the effective rate for this slab is 0.35 per cent.   So, you would receive a rebate of 0.15 per cent (0.50-0.35), whereas, had you traded with say, Kotak, you would have to go in for a one-time transaction of around Rs 10 lakh in the regular plan. 
 

KOTAK REGULAR
Derivatives(%)	Intraday	Settlement
Above Rs 25 cr	0.023	0.032
Rs 10 - 25 cr	0.03	0.05
Rs 5.5 - 10 cr	0.04	0.05
Rs 2 - 5.5 cr	0.05	0.07
Less than Rs 2 cr	0.07	0.09
Delivery (%)		Intraday (%)
Value per quarter		Value per quarter
Above Rs 2 cr	0.18	Above Rs 5 cr	0.03
Rs 60 lakh - Rs 2 cr	0.23	Rs 2 - 5 cr	0.04
Rs 20 - 60 lakh	0.27	Rs 25 lakh - Rs 2 cr	0.05
Rs 10 - 20 lakh	0.36	Less than Rs 25 lakh	0.06
Rs 5 - 10 lakh	0.45
Rs 1 - 5 lakh	0.55
Less than Rs 1lakh	0.59

  So, if you are a small time trader, you are better off with ICICI-Direct and HDFC Sec. However, if you are a compulsive trader it is schemes like the one offered by Kotak that will benefit you.   If you are an occasional trader, you should choose a scheme which offers a flat fee structure. Motilal Oswal offers one such. The firm charges a flat 0.40 per cent irrespective of the volumes.   But once you start trading with a certain broker, the thing that binds you is the comfort level you enjoy with the broker. And if you become one of their 'preferred' customers, rates no longer remain an issue. Brokers do adjust the rates and give you discounts if you keep their counters rolling consistently.