Tuesday, August 08, 2006

Online share trading, 9 rupees only

The Hindu Businessline reports that Kotak Securities is offering a flat rate for online share trading, 9 rupees per transaction. Just when you thought that all these service providers (I dont call them brokers) had ganged up to create a cartel, Kotak upsets the apple cart and rightly so.

For all deliveries up to Rs 5,000 and non-deliveries up to Rs 50,000, the brokerage would be Rs 9 per deal (statutory charges extra). For deliveries exceeding Rs 5,000, investors will have to pay an additional Rs 9 for every transaction amounting to Rs 5,000.

Even at their higher end fee of 18 rupees, thats still dirt cheap. Competitors like ICICI take upto 1% on either side of a transaction. So, Kotak would rightly expect investors to rush to them to open/transfer trading/demat accounts. Fair enough. But what if ICICI, Sharekhan and HDFC come up with equivalent rates? And the article says that they too are not too far from offering flat rates themselves. In a flat (tepid) market, will flat rates do the trick?

Update: HP is right. The 9 rupees fee is not flat, theres a 499 monthly fee and the 9 rupees is for every multiple of INR 5000. If you want a really flat structure it is at 20 rupees per trade without a monthly fee. So, its not as pathbreaking as it was made out to be in the initial report.


HP said...


If you take a detailed look at what Kotak is offering, it is not really that that cheap. The Rs. 9 flat brokerage is for each multiple of 5000. i.e. if the trade value is upto 5000, you will be charged 9, if it is between 5k&10k, you will pay 18, if it is between 10k&15K, you will pay 27....and so on. This makes the effective brokerage between .18% & .36%. Also you will have to pay a monthly fee of 499.

If you take the monthly fee & effective brokerage rate into consideration, the cost to the customer will be similar to Kotak's competitors.

arun said...

a monthly fee of 499. ???
is that true?