Indian Brokerages Bleed Clients Amidst Trading Drought, Regulatory Squeeze

Client Exodus Hits Discount Brokers

India's discount brokerage sector faced a challenging year in 2025, marked by a significant decline in active clients. The industry witnessed a contraction of nearly 53.5 lakh active users across all platforms, falling from 5.02 crore in December 2024 to 4.49 crore by December 2025. This downturn heavily impacted the country's four largest platforms: Groww, Zerodha, Angel One, and Upstox, which collectively accounted for approximately 75 percent of the total client loss.

Zerodha experienced the steepest erosion, losing approximately 12.68 lakh active clients. Groww saw a decline of nearly 10.32 lakh clients, while Angel One reported a drop of around 9.96 lakh. Upstox's active client base shrank by roughly 8.09 lakh. Other notable firms also reported reductions in their user numbers.

Regulatory Overhaul Dampens Volumes

The Securities and Exchange Board of India (SEBI) implemented a series of stringent regulatory measures that significantly curtailed market volumes. These included higher taxation on options trading, stricter margin requirements, a reduction in weekly expiries, and elevated capital thresholds. These changes collectively dampened trading activity, making it less attractive for many retail and proprietary traders.

The prevailing low volatility environment further exacerbated the situation for proprietary traders. Many who rely on strategies like selling options, which thrive on stable markets, found it difficult to generate compelling returns. The volatility index (VIX) remained in its lowest quartile, creating an unfavourable risk-reward landscape.

Global Headwinds and Domestic Woes

While global markets scaled new heights, the Indian market delivered a modest return of 7.8 percent in 2025 and failed to breach its previous high. Factors contributing to this tepid performance included poor corporate earnings and uncertainties surrounding international trade policies. Foreign Portfolio Investors (FPIs) were significant sellers, offloading shares worth ₹1.46 lakh crore in the cash market and establishing a record short position.

Mid- and small-cap stocks also underperformed, further suppressing retail participation. Despite a surge in initial public offerings (IPOs), poor listing performances contributed to lacklustre post-listing trading activity.

Shift to Traditional Brokers and Crypto

Interestingly, while discount brokerages lost clients, traditional broking firms saw modest additions. This shift is attributed to service quality concerns. During periods of frequent connectivity issues plaguing discount brokers, traditional firms with dedicated dealers offered more reliable, instantaneous support. Meanwhile, trading activity in cryptocurrencies surged, particularly on platforms allowing options trading, demonstrating traders' inclination to follow opportunities wherever they emerge.

Path to Revival

A revival in market volumes for the brokerage sector hinges on several factors. Easing regulatory norms, the potential reintroduction of expiry-day trading in more instruments, a rise in market volatility, and a sustained market rally are crucial. Only when these conditions align can the industry anticipate a meaningful return of investors and traders.