Brokerage and exchange stocks are facing the heat as a sharp decline in trading volumes and regulatory headwinds have rattled investor sentiment. The prolonged market downturn has already eroded participation, and the Securities and Exchange Board of India’s (Sebi) fresh proposals to tighten derivatives trading have only added to the pressure.
Shares of Angel One have slumped 33.25 percent year-to-date, while Motilal Oswal has declined 41 percent over the same duration. IIFL Capital has slipped 41 percent and MCX has also dropped about 26.5 percent since the start of 2025. Other market-linked stocks also tumbled—5paisa Capital and Share India Securities dropped 32 percent and 41 percent, respectively, while BSE fell 18 percent. Central Depository Services and KFin Technologies have lost nearly 42 percent of their market value this year, reflecting broader concerns about shrinking transaction volumes.
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The selloff isn’t just affecting brokerages—companies across the stock market ecosystem are feeling the heat. Wealth management firms Nuvama Wealth Management, and 360 ONE WAM are down over up to 26 percent this year, while mutual fund companies like Nippon Life India Asset Management and UTI Asset Management have lost more than 32 and 30 percent, respectively.
The average daily turnover (ADTV) in the cash segment fell 10 percent month-on-month to Rs 91,661 crore in February. In derivatives, the most popular trading segment, ADTV slipped 4 percent to Rs 287.6 trillion. From its September peak of Rs 537 trillion, derivatives volumes have now more than halved.
The slump comes at a time when Sebi is looking to clamp down on excessive speculation. Last week, the regulator proposed sweeping changes to derivatives trading, including a revised methodology for calculating open interest, tighter market-wide position limits, and restrictions on exposure to single stocks and indices. This follows a series of recent measures aimed at curbing excessive retail participation in options trading.
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Just a few days ago, Zerodha founder and CEO Nithin Kamath underscored the impact of these developments, warning that the broking industry is witnessing an unprecedented contraction. "Trading volumes have dropped by more than 30 percent across brokers. This is the first time in 15 years that we are seeing degrowth in the business," Kamath posted on X. If the current trend continues, Kamath cautioned, the government’s securities transaction tax (STT) collection could plunge to Rs 40,000 crore—half of the projected Rs 80,000 crore for FY25-26.
With global uncertainty rising—exacerbated by fresh U.S. trade tariffs on key partners like China, Canada, and Mexico—investor confidence remains fragile. The new tariffs could push inflation higher in the U.S., potentially forcing the Federal Reserve to keep interest rates elevated for longer. This, in turn, could dampen foreign flows into emerging markets like India, adding another layer of risk.
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