Stock market analysis: ETMarkets Smart Talk: The stock brokerage industry is a structural growth story, says Upstox co-founder Shrini Viswanath

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Even though the stock market moves in bullish and bearish cycles, India’s brokerage industry is one of a structural, non-cyclical growth story, believes Shrini Viswanathco-founder, Upstox. “Given the under-penetration, I would say, the growth of the industry is structural. It can be cyclical in the short to medium term due to market volatility; but in the long run the only way is up,” he says.

It is in this context that the discount brokerage platform, which recently crossed the

of 1 crore customer base, has now set an ambitious goal of 20-30 crore customer base within the next 4-5 years.

Edited excerpts from an interview:

What has been your growth rate in terms of revenue and adding new customers over the last 2 years after Covid hit us? Has the growth been below or above your expectations?
People were looking for new ways to diversify their portfolios and create new sources of income as the pandemic hit. To diversify their sources of income, more and more individuals have turned to the stock market.

At Upstox, we have grown 3X Year-over-Year (YoY) in customers as well as revenue over the past few years.

Clients trust us and recognize the value of our advanced technology and hassle-free investment process, as evidenced by our exponential growth. We recently onboarded 1 crore customers and by the end of FY23, we want to grow by 3x. Over the next four to five years, we want to onboard 20 to 30 crore customers.

What has been the rate of adding new customers over the past few months when stock markets haven’t performed as well?
Year over year, the Indian stock market has outperformed most major economies. Even though there has been some slight volatility in the market lately, it hasn’t really had an impact on customer growth. Additionally, smartphones and low-cost data have propelled investment and trade into the digital realm. Opening a demat account has become a simple and paperless process with the implementation of eKYC and Aadhaar eSign. Additionally, the excitement of upcoming IPOs has piqued the curiosity of new investors, resulting in a steady increase in equity participation. At Upstox, of all our clients, almost 70% are new investors.

Last month, BSE said registered investor accounts in India had hit the 10 crore mark. In case we see more selling in the coming days, do you think the rate of adding new customers will slow down across the industry?

Equity participation in India currently stands at 5-6% compared to the US which is around 55%. That said, the Indian brokerage industry will continue to grow even in the face of a downturn. India is a country with a high savings rate, and therefore there is immense investment potential. With increasing financial awareness, financial literacy, internet and smartphone penetration, many people have started to show keen interest in stock markets and are planning to diversify their investment portfolios. There has also been a lot of enthusiasm for IPOs.

The discount brokerage industry is also becoming increasingly competitive. Where are we going? Do you see more disruption coming with the entry of new players?

The Indian brokerage industry is large, dynamic and constantly on the lookout for new opportunities. With an equity stake in India of around 5-6%, there is still a lot of potential for brokers to thrive in India, and we are working hard to change the way Indians invest.

Some large-scale traditional brokers are also trying to enter the discount brokerage space. Do you think they can offer you some serious competition?

In India, we need to develop financial services, find new ways to do it and develop new business models. For that, we will need more competition. Competition is great because it encourages creativity and drives us to provide our customers with innovative products and solutions. We are inspired by what our peers are doing in this field.

Over the years, advancements in technology and significant changes in market structure have fueled a revolution in the brokerage industry in India. With cutting-edge technology at the heart of Upstox, a futuristic approach and constant innovation, we provide a competitive advantage over traditional brokers. It has become a critical differentiator in a highly competitive marketplace that helps brokers like us continuously create value for our clients.

Do you view the brokerage industry as a cyclical story (depending on the mood of the market) or a structural one given that there is so much under-penetration right now?

Given the under-penetration, I would say, the growth of the industry is structural. It can be cyclical in the short to medium term due to market volatility; but in the long run, the only way is upwards. More financial literacy, more well-designed products, more innovation in this space, will all lead to strong growth.

What do you think of beginners who are more interested in the options market? Is this a healthy trend?

It is interesting to observe a growing number of traders interested in the options market, which can be attributed to increased accessibility and better understanding of the benefits they offer. By the way, this has been going on for a few years now. I think it’s a healthy trend, if paired with the right educational content and well-designed products that educate and inspire customers to make the right decisions and place the right bets. It offers the opportunities and risks inherent in investment products.


Given that retail interest is growing in the Indian stock market, do you think retail would soon have a greater influence on the Nifty movement than FII?


I hope so. Retail investors are on the rise in India, part of a broader move away from traditional safe havens such as gold and real estate, as well as bank accounts. The number of active demat accounts in the country has already jumped 63% to 89.7 million in the 2021-22 financial year. Higher levels of financial literacy, accessibility of information on the internet, and availability of financial tools at everyone’s fingertips are contributing to the current wave of change in the booming Indian stock market.

The rise of stock markets mirrors India’s growth story, and the real success story for India would be when retail investors, rather than FIIs, had greater influence in the market. This is also when the average Indian can benefit from the wealth generated by the good performance of Indian companies.

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