Tips for Reducing Brokerage Costs in Indian Stock Market

Among various intrinsic elements prevailing in the stock market, brokerage is a crucial component of the same. Whenever it comes to investing in the Indian stock market, the first thing that strikes the mind of investors is the brokerage. 

Reducing Brokerage Costs

Brokerage is nothing but a fee that is paid to the stock broker against the services it provides. There could be different ways adopted by a stock broker to charge this brokerage. 

For example, they may levy a fixed brokerage for all transactions or charge a certain part of the total transaction value as brokerage. No matter which way they go, brokerage is undoubtedly an inherent part of stock trading.

How is brokerage calculated in stock trading?

In the case of intraday trading, when a stock trader purchases and sells shares in one day they prefer to choose an intraday trading strategy:

  • Intraday trading is the buying and selling of shares before the close of the trading day. Intraday trading fees can vary from 0.01% to 0.05% of the volume or amount traded, depending on the brokerage.
  • The market price of shares is multiplied by the number of shares, and then the percentage of intraday charges is multiplied once more to determine this charge.

Brokerage, as it relates to delivery trading, describes the fees an investor must pay if they decide to keep their stocks. 

With respect to delivery trading, brokerage refers to charges when the investor chooses to hold its stocks.

  • For as long as you like, you may keep your stocks moving in tandem with the market. Delivery fees range from 0.2% to 0.75% of the total trade volume.
  • Once more, the calculation for this fee is to multiply the delivery costs by the quantity of shares and their market value.

How to get the lowest brokerage charges in India?

By leveraging an expert’s investment knowhow, one can save brokerage by preferring cheap stock brokers or discount brokers over full-service brokers. Naturally, this simply means that one must become proficient in the market, which often takes years to do. 

Checking if it makes sense for you to forgo some of the typical services and reduce brokerage costs depends on your current financial situation and your financial objectives. 

The following techniques can also be used to get the lowest brokerage charges in India:

  1. Prefer to invest in exchange-trading funds (ETFs) over mutual funds as they tend to carry lower expense ratios as compared to mutual funds. ETFs are a wonderful choice for anyone with no prior expertise in the market or investing. Their more passive character enables investors to achieve long-term objectives.
  2. In a bid to avail the lowest brokerage charges in India, steer clear of equities that need front-end / entry loads, which are commissions paid at the moment a stock is purchased, or back-end / exit loads, which are fees paid when stocks are redeemed.
  3. Recognize the distinction between delivery and intraday trading fees. The former makes up a lesser portion because shares are purchased and sold every day. Because the latter’s stocks are kept for a longer duration, it is more expensive.
  4. Constantly search for perks, which might include reductions on annual maintenance charges (AMC) for your demat account or brokerage cashback.
  5. Use robo-advisory services in place of traditional brokerage firms’ or experts’ services to get the lowest brokerage charges in India. While the assets under advising in Indian robo-advisories are not as large as those in the US or the UK, they are still encouraging. Because robo-advisors are automated and don’t rely on any one person to physically monitor client accounts, their operational expenses are cheaper internally. As a result, they can afford to charge potential customers less. According to a 2019 CAMS poll, young adults and millennials between the ages of 25 and 38 make up the great majority of those who now use robo-advisories.
  6. Learn about all the costs involved with using brokerage services, including any that could be concealed, to ensure that you don’t go over budget or be caught off guard later. Disclosures from brokerage firms draw attention to any conflicts of interest. It is necessary to read and comprehend them before using their services.

The Conclusion

Whether you are already investing in stocks or planning to invest in stocks, it is always a good idea to find ways to get the lowest brokerage charges in India. The aforementioned ways are found to help investors save on brokerage in a promising way. However, if you have any other option on saving brokerage, don’t forget to share the same with us.