Crunch time for India’s stock trading apps

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Hello reader,

I’ve always enjoyed the occasional bet – I began doing this after I turned 18 and was legally allowed to gamble back home in the UK.

Generally, I wager on sporting events I would watch anyway, on the theory that it will add to my enjoyment and I’ll make some money out of it. But in practice, betting makes watching sports more frustrating and ends up hurting my bank balance most of the time.

I’ve noticed recently, though, that losses don’t seem to bother me as much as they did when I was younger. Maybe it’s because my financial situation has improved since I was a student, or perhaps I’m more able to laugh at my comically bad predictions. Whatever the reason, I’m a bit more risk-tolerant today.

Investing in the stock market isn’t exactly the same as gambling, but risk tolerance still plays a big role. Today’s premium story looks at how India’s online trading market is struggling to retain the growth it logged during the pandemic, a time when users seemed more willing to take risks.

Today we look at:

• How India’s stock trading apps are at a crossroads
• Venture builder Wavemaker Impact’s debut fund, which closed at US$60 million to invest in climate tech
• Other newsy highlights such as ByteDance taking a step towards bringing TikTok Shop back to Indonesia and Circulate Capital closing a US$73 million fund to boost the circular economy.

— Peter

Premium summary

Trade off

Image credit: Timmy Loen

Interest in stockbroking apps surged across the world during the Covid-19 pandemic, and India was no exception.

Companies like Groww and Zerodha built large user bases and saw growth soar as users sought other sources of income, but maintaining that momentum has proven a challenge in the post-Covid economy.

• Low barrier to entry: Zerodha operates under a zero-brokerage model, meaning users don’t have to pay any fees on their trades. The company says this helped its user base skyrocket from 800,000 in 2018 to nearly 12 million this year. However, user growth appears to have plateaued, with the number of active users fluctuating between 6.3 million and 6.6 million since March 2022. Analysts attribute the drop in new users to economic uncertainty and poor one-year returns on stocks, among other reasons.
• Room to grow: Despite the plummeting figures for Indian stockbroking apps, the industry appears to have a lot of room to grow. Roughly 5.7% of the country’s 1.4 billion population invest in the stock market, and some analysts expect this figure to triple in the next five years.
• Switching strategies: Data from Tracxn shows that 48 new stockbroking platforms were launched in India between 2020 and 2023, so strategies are changing as the market becomes crowded. Competing on low or zero brokerage fees may no longer be enough. As such, the likes of Groww and Upstox have been investing heavily in advertising during high-profile sporting events like the Indian Premier League. Analysts also say that players in the space are focusing on attracting users in Tier 2 and 3 cities, as this segment is predicted to drive wealth generation in the country in the coming decades.

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