Brokerage firms in India are grappling with declining earnings as derivatives trading slows, influenced by various market factors and regulatory changes.
India’s brokerage firms are seeing a drop in earnings as trading in equity derivatives slows down. In the June quarter of 2026, many listed brokers reported lower revenues. Notable firms like Groww and Angel One saw declines between 1% and 4%. In contrast, Motilal Oswal Financial Services reported an impressive 88% revenue surge, showing mixed results across the sector.
The slowdown in derivatives trading has several causes. These include a high base from the previous quarter and a drop in options premium turnover. Shripal Shah, MD & CEO of Kotak Securities, noted that the previous quarter benefited from a sharp rally in gold and silver. This rally boosted trading activity. As this momentum eased, brokers with more exposure to derivatives felt the impact more. Suresh Shukla, Chief Business Officer at Motilal Oswal Financial Services, echoed this sentiment. He mentioned that while investor participation remained healthy, trading volumes were volatile due to geopolitical issues, complicating the market landscape.
Revenue Dynamics Among Major Brokerage Firms
IIFL Capital Services reported a slight revenue increase of 3% from the previous quarter. Meanwhile, Groww’s revenue remained flat. This stagnation shows a significant shift in earnings among brokers. Notably, Motilal Oswal turned around from a ₹49 crore loss in the previous quarter to a profit of ₹665 crore. This highlights its resilience amid market fluctuations. The stark differences in performance suggest that firms with diversified revenue streams are better positioned to handle the downturn in derivatives trading.
Angel One and Anand Rathi Share & Stock Brokers reported profit declines of 23% and 44%, respectively. This trend indicates that firms heavily reliant on derivatives trading are struggling to stay profitable as market conditions change. Raj Gaikar, a research analyst at Samco Securities, pointed out that year-on-year growth across all players shows healthy retail participation. However, sequential weakness is largely driven by regulatory changes and geopolitical tensions. Recent reforms in derivatives trading by the Securities and Exchange Board of India (SEBI) have also played a crucial role. These reforms aimed to rationalize expiry dates and tighten position limits, reducing index options premium turnover and impacting broker revenues. Firms that have diversified revenue streams, such as those focusing on wealth management and margin trading funding, are better insulated against these fluctuations. The rise of margin trading funding (MTF) is expected to support earnings through higher interest income, providing a buffer for brokers facing declining derivatives revenues.
Raj Gaikar, a research analyst at Samco Securities, pointed out that year-on-year growth across all players shows healthy retail participation.
Career Ahead’s analysis shows that changing dynamics in brokerage revenues require financial analysts to adapt their strategies. Analysts must now consider the implications of regulatory changes and market volatility when assessing brokerage firms’ performance. Relying on derivatives trading as a primary revenue source is becoming less viable. This prompts a reevaluation of investment strategies. As the market stabilizes, firms that can adapt their strategies to focus on cash markets and diversified revenue streams will likely perform better, as shown by the mixed performance of brokers this quarter.
Impact of Commodity Market Changes on Brokerage Revenue
The decline in derivatives trading is not the only factor affecting brokerage revenues. The commodity markets, especially gold and silver, have reversed the bullish trends that previously benefited brokers. After a sharp rally in the first quarter of 2026, the decline in these commodities has heavily impacted revenue growth for many firms. This shift has forced brokers to reassess their strategies and adapt to changing market conditions.
Market analysts have noted that while retail cash market turnover rose by 18-19%, overall volatility in trading volumes has created uncertainty. This mixed performance highlights the challenges brokers face in adapting to rapid market changes. As geopolitical tensions escalate, investor sentiment fluctuates, leading to inconsistent trading activity. For brokers like Groww, the flat topline reflects a significant shift in their earnings mix. With a decline in derivatives income from an elevated Q4 base, the firm has relied more on margin trading funding and commodity derivatives to stabilize its revenue. This shift emphasizes the need for brokers to diversify their income sources to remain competitive.
Moreover, the continued growth of margin trading funding (MTF) is expected to support earnings through higher interest income. Analysts suggest that traditional brokers with stronger cash market exposure are likely to be better positioned despite softer derivatives volumes. As the market stabilizes, firms that can adapt their strategies to focus on cash markets and diversified revenue streams will likely perform better. The evolving landscape of brokerage earnings in India requires a keen focus on market trends and regulatory developments. Financial analysts and investment brokers must stay informed about these changes to navigate the current market environment’s challenges and opportunities.
As the market continues to evolve, how will brokerage firms adapt their strategies to maintain profitability? The next few quarters will be crucial in determining which firms can successfully pivot to meet these challenges. With changing regulations and market dynamics, the ability to innovate and diversify will be key to sustaining growth in the brokerage sector.
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The next few quarters will be crucial in determining which firms can successfully pivot to meet these challenges.
Frequently Asked Questions
What factors are causing revenue declines in equity derivatives trading?
Career Ahead’s analysis shows that revenue declines in equity derivatives trading are mainly due to regulatory changes by SEBI, a decline in options premium turnover, and a high base from the previous quarter driven by a rally in gold and silver.
How can financial analysts adapt to the changing brokerage landscape?
Financial analysts can adapt by diversifying their assessments to include firms with varied revenue streams, focusing on cash market performance, and staying informed about regulatory changes that impact trading strategies.
What should investment brokers consider when choosing firms to work with during market fluctuations?
Investment brokers should consider firms’ exposure to cash markets versus derivatives, their ability to adapt to regulatory changes, and the diversification of their revenue sources to ensure stability in fluctuating market conditions.
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