FY26 Not Promising for Broking Industry, Degrowth Real Concern

Both cash and derivatives markets have seen significant volume drops from their peaks.

- Shripal Shah, MD & CEO, Kotak Securities

Is this due to the market downturn or tighter derivatives regulations?

The decline in volumes for cash and derivatives markets stems from distinct factors. The cash market has slowed mainly due to the broader market correction. The drop on the derivatives side is tied to reduced volatility and new regulatory measures. Peak options trading occurred in June, fueled by high volatility, an election result, and other events. Since October, the Securities and Exchange Board of India's (Sebi's) regulations have further curbed participation.

New account openings are also slowing. What does this indicate? Have we reached a saturation point, or is it just a reflection of the market mood?

We are far from hitting a ceiling. The slowdown in new accounts mirrors current market sentiment. When sentiment dips, enthusiasm for any asset class tends to wane. Compared to July's numbers, we're down about 50 percent, but this is likely a short-term trend.

These rules protect retail investors, 90 percent of whom were trading derivatives without understanding the risks. The phased rollout of regulations gave firms time to adjust.

How has Kotak been affected by these regulations?

The regulations impact everyone, but Kotak is less exposed since derivatives aren't a major revenue driver for us. Some discount brokers rely on derivatives for 75-85 percent of their income, so they are hit harder. For us, reliance on derivatives revenue is not as high and diversified streams—margin trading, cash markets, and institutional business—cushion the blow.